Legislature(1995 - 1996)

06/06/1996 09:20 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  SENATE BILL NO. 1003                                                         
                                                                               
       An Act relating to public employees.                                    
                                                                               
  CHUCK  O'CONNEL, BUSINESS  MANAGER,  ALASKA STATE  EMPLOYEES                 
  ASSOCIATION (ASEA) spoke in  support of SB 1003.   He stated                 
  that  ASEA  can  accept the  compromise  represented  by the                 
  legislation.  He observed that the legislation makes changes                 
  to the retirement system  that ASEA has resisted.   He noted                 
  that there is  no diminishment  of benefits for  any of  the                 
  present bargaining units.  He  observed that contracts would                 
  have  to  be voted  on  again  if there  were  reductions in                 
  benefits for existing bargaining units.                                      
                                                                               
  MARK  BOYER,  COMMISSIONER,  DEPARTMENT   OF  ADMINISTRATION                 
  reviewed changes to SB 1003 made by the Senate.  He observed                 
  that  references  to  geographic  differentials  have   been                 
  deleted.   Reference to  the geographic  differential as  it                 
  relates to municipal assistance and revenue sharing were not                 
  included  in the  legislation.   He  explained  that it  was                 
  unnecessary  to  restate in  Title  29 the  differentials in                 
  these programs.   The legislation maintains the  status quo.                 
  The legislation would provide  that leave be accrued at  the                 
  rate of pay in which it is earned.  Presently, leave paid at                 
  cash out is at the current wage  rate, not the rate at which                 
                                                                               
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  it was  earned.   Retirement will  be based  on the  average                 
  salary of the highest five years  times the years of service                 
  with a multiplier, instead of the  highest three years.  The                 
  legislation also  changes the  qualification for  retirement                 
  health benefits.   New employees will  have to work for  the                 
  State for a  minimum of ten  years, instead of five,  before                 
  qualifying for retirement  health benefits.   New  employees                 
  would still be eligible for other aspects of  the retirement                 
  system after five  years.  The legislation also  contains an                 
  early  retirement  incentive   program  and  clarifies   the                 
  qualifying criteria for cost of  living differentials in the                 
  marine units.   A person must  otherwise qualify as if  they                 
  were receiving  a permanent fund dividend in  order to prove                 
  residency  for the  purposes of  receiving a cost  of living                 
  differential.  Legislators' salaries  will not be  increased                 
  by the provisions  that approve  the monetary  terms of  the                 
  contracts.  Non-covered  employees would also receive  a 1.4                 
  percent increase for three years.                                            
                                                                               
  In   response  to   a  question  by   Representative  Brown,                 
  Commissioner Boyer noted  that section  10 was deleted  from                 
  the legislation because it  duplicated language existing  in                 
  statute.    He noted  that  it  was not  the  intent  of the                 
  Governor to change differentials of the municipal assistance                 
  and revenue  sharing programs.   Changes  to the  retirement                 
  system  of  new police  and  fire department  employees were                 
  eliminated.  He  observed that  the benefit calculation  was                 
  eliminated from sections 20 and 21.   He added that sections                 
  22 and  23 were  eliminated.   He explained  that clarifying                 
  language   was   added   to  provisions   regarding   salary                 
  adjustments for judicial employees.  A new section was added                 
  to clarify that  appropriations made for the  University are                 
  made for  contracts during the current  legislation session.                 
  A reference to the limitation  of employee salaries relating                 
  to  the  geographical   differential  was  eliminated.     A                 
  traditional period for  conversion from an hourly bank  to a                 
  cash bank was included.                                                      
                                                                               
  In  response   to  a  question   by  Representative   Brown,                 
  Commissioner Boyer noted that  leave conversions only effect                 
  non-covered employees.  He added that retirement changes are                 
  not subject to bargaining.   Retirement changes would effect                 
  new  employees  only.   He  explained that  the Constitution                 
  prevents modification or impairment of benefits  for current                 
  employees.  The  cost of  living differential language  will                 
  effect  new  contracts in  the  marine highway  system.   He                 
  observed that a recent Superior Court decision validates the                 
  State's position that the State has the  authority to change                 
  the format of the  differential.  A new qualifying  form has                 
  been sent to marine  highway employees that conforms to  the                 
  definition change included in the legislation.                               
                                                                               
                                                                               
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  Representative Martin asked for more details on the proposed                 
  retirement incentive program (RIP).                                          
                                                                               
  Commissioner Boyer noted that the contracts have a four year                 
  span.   There would  be no  increase the  first year of  the                 
  contract.    The  total  four year  cost  for  the  contract                 
  increase is approximately  $32 -  $34 million  dollars.   He                 
  observed that the changes included  in the legislation would                 
  save approximately $17.0 million dollars over the first five                 
  years.  This amount would grow exponentially over time.  The                 
  total  savings  over  25  years  would be  approximately  51                 
  million dollars.                                                             
                                                                               
  BOB  STALNAKER,   DIRECTOR,  DIVISION   OF  RETIREMENT   AND                 
  BENEFITS, DEPARTMENT  OF ADMINISTRATION reiterated  that the                 
  only remaining cost reduction provisions in  the legislation                 
  are the  five year average  salary and ten  year requirement                 
  for  retirement health insurance.   These will  result in an                 
  employer  savings of  approximately 1.8  percent.   Employer                 
  cost would be  approximately 8 percent upon  transition into                 
  the Tier III environment.   He noted that the  RIP provision                 
  has not been altered.                                                        
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker stressed that employees determine their ability to                 
  RIP  based  on the  level of  salary  they would  receive at                 
  retirement.  He  pointed out that  some of the highest  paid                 
  employees  are  excluded  from  the   RIP  provisions.    He                 
  estimated that  the majority  of employees exercising  early                 
  retirements are at the mid range level.                                      
                                                                               
  Representative Therriault  noted that  the University  saved                 
  the  most money  in the  previous RIP.   Commissioner  Boyer                 
  noted that the University  is eligible to implement  the RIP                 
  provisions.                                                                  
                                                                               
  Representative Mulder MOVED to report CSSB 1003 (FIN) am out                 
  of Committee  with individual  recommendations and  with the                 
  accompanying fiscal notes.  There being NO OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  Commissioner Boyer noted  that the  two accompanying  fiscal                 
  notes were not  adopted by the Senate.  He stressed that the                 
  Department of Administration will ask the Legislative Budget                 
  and Audit Committee for authority to expend retirement funds                 
  if the fiscal notes are not appropriated.                                    
                                                                               
  CSSB 1003 (FIN)  am was reported  out of Committee with  "no                 
  recommendation"  and  with two  fiscal  impact notes  by the                 
  Department of Administration.                                                
                                                                               
  CSSB 1005 (FIN) am was reported out of Committee with  a "do                 
                                                                               
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  pass" recommendation.                                                        

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