Legislature(2023 - 2024)BARNES 124
02/02/2023 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB22 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 22 | TELECONFERENCED | |
HB 22-PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS
8:07:14 AM
CHAIR MCCORMICK announced that the only order of business would
be HOUSE BILL NO. 22, "An Act relating to participation of
certain peace officers and firefighters in the defined benefit
and defined contribution plans of the Public Employees'
Retirement System of Alaska; relating to eligibility of peace
officers and firefighters for medical, disability, and death
benefits; relating to liability of the Public Employees'
Retirement System of Alaska; and providing for an effective
date."
8:07:52 AM
CHAIR MCCORMICK opened public testimony on HB 22.
8:08:16 AM
EDNA DEVRIES, Mayor, Matanuska-Susitna Borough, stated that the
Matanuska-Susitna (Mat-Su) Borough has not taken a position on
HB 22 but is in the process of figuring this issue out in the
next week, at which time the borough would update the committee.
8:09:50 AM
JUSTIN MACK, Fire Fighter, Anchorage Fire Department;
Secretary/Treasurer, Alaska Professional Fire Fighters
Association, testified in support of HB 22. He spoke about
shared responsibility among employees, employers, retirees, and
the State of Alaska in relation to recruitment, retention, and
retirement. He allowed there are risks and challenges in a
defined benefit system for retirement, but opined pensions "can
be done the right way." He said the new system would help local
communities retain public safety workers without creating an
unfunded liability. He talked about a "real world study" going
on in Washington, D.C., for 45 years, and he spoke about the
ensuing good results of that study. He said the right way to
offer a pension is to offer a modest benefit and, he reiterated,
to share the risk amongst all parties, as well as to maintain
the health of the retirement system. He encouraged committee
members to contact their local fire chief, police chief, and
school superintendent to ask about this issue firsthand. He
talked about the opportunity for Alaska to create a well-funded
401K combined with a defined benefit plan coupled with social
security, which he opined is the ideal model for a successful
retirement. He indicated he has none of those things, and the
probability of success [in retirement] following a 25-year
career is "about 6 percent." That jumps to 22 percent after 30
years. He remarked, "This is the value we place on sworn public
safety officers." He urged the committee to move HB 22 forward,
without amendments.
8:13:27 AM
CHAIR MCCORMICK recognized previous testifier Ms. Devries as
having formerly served as a Senator in the Alaska State
Legislature.
8:13:52 AM
JOHN BREEN, representing self, testified in opposition to HB 22,
which he characterized as "ill-advised and unnecessary." He
discussed the options of IRAs and 401k retirement investing,
indicating more could be saved through the 401k. He offered his
understanding that most private citizens do not have access to a
401k. He concluded that [those listed under the provisions of
HB 22] must be "special people," but then said they are no more
special than anyone else. He said, "We could give them a 401k,
with a good match, and they could manage their own retirement
just like the rest of us have to do. And that's about all I
have to say."
8:15:56 AM
SHAYNE WESTCOTT, Firefighter, Anchorage Fire Department; Member,
Alaska Professional Firefighters Board, indicated that when [the
board] was addressing the pension issue, it considered how to
make it effective for both parties. He stated that the fiscal
note for House Bill 55 [heard during the Thirty-Second Alaska
State Legislature] was directed in part to "pay down the
unfunded liability," which was approximately 22 percent. He
said, "When that unfunded liability is paid off, that cost is
now down to 12 percent." He opined that is a sustainable number
and is comparable to the cost of private sector [retirement]
when factoring in a 401k match, as well as social security. He
said years have been spent to come up with a quality plan that
benefits both employee and State of Alaska, with minimum risk,
and he said that is why he supports HB 22.
8:18:18 AM
DOMINIC LOZANO, President, Alaska Professional Firefighters,
testified in favor of HB 22. He opined that both the defined
benefit (DB) system and the defined contribution (DC ) system
work; however, he argued that the current DC system is broken,
as expressed by management and employees. He said the current
DC system is underfunded; a successful DC system requires a 30
percent contribution, whereas the current contribution by
employers is 5 percent. He recounted his experience researching
retirement plans across the country, and he reported that there
is no other state in the country that mandates a DC system for
its public safety employees. He emphasized that DB system plans
work; they provide modest benefits, are multigenerational and
"smoothing," enable employees to have a stable retirement, and
the risk is shared. Under HB 22, he noted, the risk is shared.
8:21:40 AM
CHAIR MCCORMICK, after ascertaining there was no one else who
wished to testify, closed public testimony on HB 22.
8:22:11 AM
The committee took an at-ease from 8:22 a.m. to 8:24 a.m.
8:24:49 AM
CHAIR MCCORMICK announced that the committee would take up the
consideration of amendments.
8:25:02 AM
REPRESENTATIVE MCCABE moved to adopt Amendment 1 to HB 22,
labeled 33-LS0259\A.3, Klein, 2/1/23, which read as follows:
Page 18, following line 14:
Insert a new bill section to read:
"* Sec. 31. AS 39.35.680(9) is amended to read:
(9) "compensation" means
(A) for an employee who does not receive a
benefit under AS 39.35.370(l), the remuneration earned
by an employee for personal services rendered to an
employer, including employee contributions under
AS 39.35.160, cost-of-living differentials only as
provided in AS 39.35.675, payments for leave that is
actually used by the employee, the amount by which the
employee's wages are reduced under AS 39.30.150(c), an
amount that is contributed by the employer under a
salary reduction agreement and that is not includable
in the gross income of the employee under 26 U.S.C.
125 or 132(f)(4), and any amount deferred under an
employer-sponsored deferred compensation plan, but
does not include retirement benefits, severance pay or
other separation bonuses, welfare benefits, per diem,
expense allowances, workers' compensation payments, or
payments for leave not used by the employee, whether
those leave payments are scheduled payments, lump-sum
payments, donations, or cash-ins; for a member first
hired on or after July 1, 1996, compensation does not
include remuneration in excess of the limitations set
out in 26 U.S.C. 401(a)(17) (Internal Revenue Code);
(B) for an employee who receives a benefit
under AS 39.35.370(l), the remuneration earned by an
employee for personal services rendered to an
employer, including employee contributions under
AS 39.35.160, cost-of-living differentials only as
provided in AS 39.35.675, payments for leave that is
actually used by the employee, the amount by which the
employee's wages are reduced under AS 39.30.150(c), an
amount that is contributed by the employer under a
salary reduction agreement and that is not includable
in the gross income of the employee under 26 U.S.C.
125 or 132(f)(4), and any amount deferred under an
employer-sponsored deferred compensation plan, but
does not include overtime compensation, retirement
benefits, severance pay or other separation bonuses,
welfare benefits, per diem, expense allowances,
workers' compensation payments, or payments for leave
not used by the employee, whether those leave payments
are scheduled payments, lump-sum payments, donations,
or cash-ins; for a member first hired on or after
July 1, 1996, compensation does not include
remuneration in excess of the limitations set out in
26 U.S.C. 401(a)(17) (Internal Revenue Code);"
Renumber the following bill sections accordingly.
Page 19, line 31, through page 20, line 1:
Delete "sec. 35"
Insert "sec. 36"
Page 20, line 9:
Delete "sec. 35"
Insert "sec. 36"
Page 20, line 16:
Delete "sec. 35"
Insert "sec. 36"
Page 22, line 24:
Delete "secs. 4 - 36"
Insert "secs. 4 - 37"
Page 22, line 29:
Delete "Section 37"
Insert "Section 38"
Page 22, line 30:
Delete "sec. 38"
Insert "sec. 39"
CHAIR MCCORMICK objected for the purpose of discussion.
8:25:08 AM
REPRESENTATIVE MCCABE spoke to Amendment 1. As written, he
observed, Section 30 of HB 22 would calculate average monthly
compensation for those joining the DB plan as the five
consecutive payroll years during the period of credited service
with the highest average. However, he pointed out that that
could include a host of other compensation, including overtime,
per diem, and pay for unused leave. He said Amendment 1 would
make changes to the definition of "compensation" in Section 30
to stipulate the compensation would be limited to "base wages or
salaries." He opined that this calculation would make the
retirement plan fair and manageable. He indicated many police
and fire rescue employees work overtime to increase the average
in the "high three years," which creates an unsafe situation.
He said he thinks the five-year rolling average makes sense.
8:27:14 AM
REPRESENTATIVE HIMSCHOOT said these fields of service are "a
24/7/365 operation," and she pondered whether overtime is
required in order to staff for such a schedule. She questioned
whether Amendment 1 would affect the ability to offer overtime.
REPRESENTATIVE MCCABE shared his understanding that it would not
impact the ability to offer overtime. He described his
background in fatigue risk management, and he questioned the
safety of officers who are awake for 16 hours on the job and
"have the mental acuity of somebody that is legally drunk." He
said the committee needs to decide whether it wants to protect
citizens from possible negative actions of an officer who has
stayed on the job for too many hours merely to "plus up" his/her
high three years for retirement.
8:29:49 AM
REPRESENTATIVE HIMSCHOOT said she agreed on the impact of lack
of sleep; however, she thinks people should be paid for working
overtime. She said she would like to tackle the issue by
increasing staffing to eliminate the need for overtime;
therefore, she said she would not support Amendment 1.
REPRESENTATIVE MCCABE clarified that Amendment 1 would not
eliminate paying overtime; it would just make it so the overtime
paid would not count toward retirement. He allowed that
occasional overtime is not bad; it's when it is done repeatedly
and purposefully to increase retirement pay that it becomes
detrimental.
8:32:43 AM
REPRESENTATIVE MCKAY shared an anecdotal example about bumping
up "high threes." He spoke about senior officers wasting their
talents serving as traffic cops.
8:33:46 AM
REPRESENTATIVE HIMSCHOOT suggested someone who is extremely
tired may be safer directing traffic than responding to 911
calls, and she would trust management to figure that out. She
said she would like there to be a system in which people aren't
working themselves to the bone. She reiterated she would not
support Amendment 1.
REPRESENTATIVE MCKAY replied he thinks that if senior officers
sign up to direct traffic, there is nothing management can do
about it.
8:34:38 AM
REPRESENTATIVE MCCABE noted that senior officers doing traffic
duty still carry guns. In the case of accidents, he said, when
the bottom of the chain of events begins with fatigue, it is a
big issue.
8:35:26 AM
REPRESENTATIVE MEARS noted that flights get cancelled when
pilots get "timed out," and truck drivers have limits on [time
worked]. She argued that [Amendment 1] is not the mechanism to
manage this concern.
8:35:53 AM
REPRESENTATIVE RUFFRIDGE argued that it was imperative that the
committee and legislative body as a whole deal in real numbers
and facts. He noted that the proposed bill is seeking to have a
"high five" instead of a "high three." He said he would like to
see numbers showing the difference between a base salary with no
increases and a public safety employee working "to the bone" for
five years.
REPRESENTATIVE MCCABE responded that he does not have those
numbers because the bill had been rushed. He referenced a
resolution from the Municipality of Anchorage [included in the
committee packet], urging the legislature to "diligently vet"
the proposed legislation on both the House and Senate side and
collaborate with municipalities to produce a final bill for
passage. He talked about the high cost of retirement and 31
cities' employers that are delinquent in paying, and he
questioned whether the legislature would drive them further into
delinquency. He urged inviting these employers to testify and
weigh in on the issue.
8:40:10 AM
REPRESENTATIVE RUFFRIDGE, regarding the 31 delinquencies, which
he said exist among all tiers of the retirement system, offered
his understanding that "the proposed new tier or new system"
would not change the requirement for the municipalities to "pay
in" their 22 percent; therefore, the delinquency would still
exist with or without HB 22. He asked Representative McCabe for
response.
REPRESENTATIVE MCCABE answered, "We don't know." He said the
committee has not invited anyone from the Division of Retirement
and Benefits or the Legislative Finance Division to testify. He
reiterated his point that the contribution is the same and
already the employers are struggling to pay it. He requested
that the bill be set aside to allow time to hear from both
divisions and the 31 municipalities that are behind in their
payments.
8:43:15 AM
CHAIR MCCORMICK said he appreciated the discussion, then steered
the focus back to Amendment 1.
8:43:40 AM
REPRESENTATIVE RUFFRIDGE said, in looking at the proposed
amendment, there was no explanation of the associated numbers or
costs. He asked whether Amendment 1 would affect the delinquent
municipalities' ability to pay.
REPRESENTATIVE MCCABE reiterated that he did not know.
8:45:42 AM
REPRESENTATIVE MCCABE, in response to a comment by
Representative Himschoot, explained that many bills that are
pre-filed do not necessarily get heard; therefore, bringing in
invited testimony may not happen right away. He commented that
it is unusual to see a bill like this pushed through so fast.
REPRESENTATIVE HIMSCHOOT replied that "it passed the House twice
before."
REPRESENTATIVE MCCABE said he knew about it having passed once
before.
8:46:53 AM
REPRESENTATIVE ANDY JOSEPHSON, Alaska State Legislature, as
prime sponsor of HB 22, noted that of the 31 identified
communities, only about 6 would be impacted by the bill, because
most do not have their own police and fire services. He
clarified that the delinquencies were not relevant to the bill.
He explained that the only things calculated in the formula were
base pay and overtime. Further, he said he believes the use of
overtime is a management decision, and many departments are so
understaffed that overtime becomes necessary.
REPRESENTATIVE MCCABE emphasized that he wanted to hear from the
actuaries and the experts. He recalled that Representative
Josephson had stated early in the bill's introduction that [this
issue] would not end with police and fire, indicating that
teachers would want a new retirement system.
8:50:05 AM
CHAIR MCCORMICK once again steered the committee's focus back to
Amendment 1.
8:50:13 AM
REPRESENTATIVE RUFFRIDGE suggested the need to look into the
fiscal analysis in terms of whether or not "individuals are
getting a huge amount of overtime for the course of three to
five years." He said there are clear actuarials from the last
time this issue was addressed in House Bill 55. Regarding the
idea that putting public safety professionals in positions of
working overtime is scary, he shared his experience of them is
that they are "the ultimate professionals" who would not
willingly "put the public at risk in order to personally
benefit." He characterized Amendment 1 as misplaced, thus said
he would not support it.
REPRESENTATIVE MCCABE reiterated his experience in fatigue risk
management and recounted personal examples of pilots who were
fatigued and flew anyway. He said he appreciated Representative
Ruffridge's questioning of his expertise in this area but called
it misplaced, and he urged Representative Ruffridge to conduct
his own fatigue risk management study. He emphasized that he
had not said the police would intentionally put the public at
risk.
CHAIR MCCORMICK interjected his concern that the conversation
was veering into personal attacks.
8:54:10 AM
REPRESENTATIVE MCKAY, to Representative Ruffridge, commented
that he does not think anyone can truly know another person's
intention. He advised, "We have to do what's on paper and
what's right for the state."
8:54:49 AM
CHAIR MCCORMICK maintained his objection to the motion to adopt
Amendment 1 to HB 22.
8:55:01 AM
A roll call vote was taken. Representatives McKay and McCabe
voted in favor of Amendment 1 to HB 22. Representatives
Ruffridge, Himschoot, Mears, and McCormick voted against it.
Therefore, Amendment 1 failed to be adopted by a vote of 2-4.
8:55:47 AM
The committee took an at-ease from 8:55 a.m. to 8:56 a.m.
8:56:48 AM
REPRESENTATIVE MEARS moved to report HB 22 out of committee with
individual recommendations.
REPRESENTATIVE MCCABE objected.
8:57:12 AM
The committee took a brief at-ease at 8:57 a.m.
8:57:32 AM
REPRESENTATIVE MCKAY objected to the motion and stated for the
record that Representative Patkotak was not present to vote on
the bill.
8:57:42 AM
A roll call vote was taken. Representatives Ruffridge,
Himschoot, Mears, and McCormick voted in favor of the motion to
report HB 22 out of committee with individual recommendations.
Representatives McCabe and McKay voted against it.
CHAIR MCCORMICK announced that with a vote of 4 yays and 2 nays,
HB 22 would move to the next committee of referral with
individual recommendations. [The fiscal note for HB 22 was
adopted by the committee on 2/14/23.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| Amendment from Rep. McCabe to HB 22.pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| Copy of New Officer Costs APDEA Sgt. Darrell Evans.xlsx |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| DPS - Cost to Replace a State Trooper - January 2023.pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| FFD cost of hiring from Scott Raygor Fire Chief Fairbanks.docx |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| HB 22- ACOA Letter of Support.pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| HB 22- APDEA Letter of Support.pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| HB 22- Bryan Vincent Letter of Support.pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| HB 22 in CRA.xlsx |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |
| HB 22 Supporting Document- Anchorage Resolution 2023-027(S).pdf |
HCRA 2/2/2023 8:00:00 AM |
HB 22 |