Legislature(1997 - 1998)
05/06/1997 04:08 PM House HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 164 - TEACHERS RETIREMENT: ELIGIB. & SICK LEAVE Number 1824 CHAIRMAN BUNDE announced the next item on the agenda was HB 164, "An Act providing that employment as a legislator or with the National Education Association is not credited service under the teachers' retirement system; prohibiting membership in the teachers' retirement system for holders of limited certificates; removing teachers holding limited certificates to teach Alaska Native language or culture from membership in the teachers' retirement system; and repealing a provision permitting members of the teachers' retirement system to count unused sick leave credit as credited service." REPRESENTATIVE AL VEZEY, Sponsor of HB 164, said the bill is a result of the review of the annual report of the teacher retirement system (TRS). A statute provides that a person who is a member of TRS may elect to continue participating in TRS if they become an elected legislator. He felt this was a legislative privilege. The TRS is substantially different from the Public Employee Retirement System (PERS) as it costs more money and accrues more benefits at a faster rate. He felt this inequity should be removed from the statute. REPRESENTATIVE VEZEY said HB 164 also removes the ability of National Education Association-Alaska (NEA-Alaska) members to participate in TRS. He understood that NEA-Alaska did not object to this language. He added that there is also a statutory mandate which local school districts grant to teachers of the option, at no cost to the teacher, of taking their unused sick leave and having the employee's and the employer's contribution rates to accumulate additional retirement benefits. He did not feel it was in the best interest of the local school district to continue this mandate. He felt the school districts were perfectly capable of bargaining these units with the teachers. Taking this provision out of statute would return more control to the local school districts. Number 1938 CHAIRMAN BUNDE declared his conflict as he was a teacher and now he is a legislator. He asked Mr. Church how former teachers would be impacted by HB 164. BILL CHURCH, Retirement and Benefits Manager, Division of Retirement and Benefits, Department of Administration, explained that anyone hired into TRS before passage of HB 164 would still be covered in the same way. It would only affect those individuals who are enrolled in TRS after the passage of HB 164. Those individuals would begin to accrue credit under PERS and would not being accruing credit under TRS. CHAIRMAN BUNDE asked if someone who was currently a teacher and then is elected to the legislature would go into PERS as compared to the current system where a teacher, elected to the legislature, continues in the TRS system. Number 1973 MR. CHURCH answered that the person could elect to continue in TRS. Number 2012 REPRESENTATIVE VEZEY stated that if you are participating under TRS, then a 2 percent or a 2.25 percent retirement amount is being accrued based on the salary of a teacher as compared to the legislative salary. A legislator who is accruing money in the TRS system is accruing 2.5 times as much as other legislators. Number 2030 MR. CHURCH explained that under PERS an individual will accrue benefits at 2 percent for the first ten years, 2.25 percent for the second ten years and 2.5 percent for each year over 20 years. In TRS, it is 2 percent for the first 20 years and then 2.5 percent for each year of accrual after the 20 years. The benefit will be based on the average of the high three salaries in TRS. Presently a new employee would have their benefit based on the average of the high five consecutive years. The PERS has increased multipliers so at the end of the 20 years you have little bit higher percentage base. Number 2069 REPRESENTATIVE PORTER asked about obtaining credit at service time for cashing in unused sick leave. He asked if this was sick leave that did not have a cash value in the first place. Number 2079 MR. CHURCH was not sure whether or not there was a cash value within each district. This is unused sick leave which is not cashed out, it is on the books at the time that the member retires. This sick leave may be claimed by the teacher. Number 2096 REPRESENTATIVE PORTER asked if there were other bargaining units which had that provision. Number 2098 MR. CHURCH answered that he was not aware of any others. Number 2101 CHAIRMAN BUNDE asked if the terminology had changed, if it had gone from sick leave to personal leave or if it depended on the school district. Number 2107 MR. CHURCH explained that there is a difference between sick leave, annual leave and the personal leave concept. Personal leave rolls in both annual and sick leave. There is a higher accrual rate and the leave can be used for any purpose. All of this leave can be cashed-out on separation of state service. He stated that there is a cash value for personal leave. The state system allows a person to cash-out their annual leave upon termination, but the sick leave is lost. Number 2132 REPRESENTATIVE KEMPLEN asked how long it would take a person to be vested in the PERS system. Number 2162 MR. CHURCH answered that it took five years to be vested in the PERS system for retirement benefits. Number 2192 REPRESENTATIVE KEMPLEN clarified that a representative would have to be elected for three terms in order to be vested. He felt there was a disincentive to run for office if a person only wanted to serve for two terms. MR. CHURCH mentioned that elected officials could choose whether or not they wanted to participate in PERS. A person could choose to continue in TRS, working after session for a semester with their district. Number 2221 CHAIRMAN BUNDE commented that if this person worked for the university there is a strong constitutional prohibition against continuing their work while they are a legislator. MR. CHURCH added that this was also applicable for a legislator working for the state. TAPE 97-42, SIDE B Number 0000 REPRESENTATIVE KEMPLEN said it was a disincentive for teachers to run for public office, unless they planned on being there long enough to become vested in PERS. Number 0014 MR. CHURCH explained that is certainly would depend on how many years the teacher had already accrued in TRS. It takes eight years to vest in TRS. If a person has 20 years of teaching in Alaska, they are eligible for retirement benefits. Number 0044 CHAIRMAN BUNDE asked whether or not the employer had to match contributions for sick leaves used as retirement credit and, if this was the case, why wasn't there be a positive fiscal note. Number 0081 REPRESENTATIVE VEZEY explained that the statute calls for the employer, who is not the state of Alaska, to pay. This would not benefit the state financially. The statute calls for the employer to pay both the employee's and the employer's contribution. A person could debate that there would be a savings by the school district because they would be free to negotiate how to use that resource. Number 0123 MR. CHURCH said the division had asked their actuary to look at what would happen to the funding ratio if the unused sick leave provision was eliminated. The actuary estimated that the future contribution rate would be reduced by .36 over the next 25 years, which would decrease employer contributions by approximately $200,000 at the end of 25 years. Number 0158 REPRESENTATIVE VEZEY asked if the contribution rate of .36 was the past or current service rate. Number 0164 MR. CHURCH answered that this would be under the normal cost. It is part of the actuarial assumptions that go into establishing normal cost (Indisc.-coughing). Number 0177 CHAIRMAN BUNDE mentioned that the actuarial impact of HB 164 would have no positive or negative impact on TRS. MR. CHURCH answered that this would be correct. After 25 years there would be a decrease of .36. Number 0205 JOHN CYR, President, National Education Association-Alaska (NEA- Alaska), stated that his organization is in opposition to HB 164. Currently, there is one member of NEA-Alaska in TRS who is grandfathered-in and will continue to participate whether or not this bill passes. He explained that NEA-Alaska has been out of TRS for a number of years. MR. CYR felt it was wrong to set one class of public employees apart from another class. He presented a scenario where someone taught for 17 years and then ran for political office. If that person won, they would lose as they would have to wait until they reached age 55 to get retirement. A person employed by that school, who was not a teacher, would be able to continue in PERS. He felt this was a disincentive to public service. Number 0343 MR. CYR referred back to the time when schools were state operated, the legislature, through statute, found sick leave to be a benefit provided for teachers and for their districts. This sick leave has always been credited for retirement. Teachers do not collect annual leave or any of the other types of leave that PERS employees receive. A teacher can lose their job or their certificate if they misuse sick leave. The amount of money that has been set aside for teachers is an earned benefit, used towards retirement. This is a proper use of the state's resource and it provides a benefit to the districts, to children and to the membership. To put this benefit into an area to be bargained, district by district, is unworkable. He was not sure that the districts can bargain sections of the state retirement system. The state might not want individual districts bargaining for a provision that is owned by the state. MR. CYR added that secondarily, his organization does not know how it would work even if it could be done. Teachers have bargained half a dozen contracts. Every time a contract was bargained, there would be the potential of having a different group of people working in the same system who would be covered under a different way for sick leave. Alaska is a transient state. People move from district to district. Number 0506 MR. CYR felt HB 164 should not be passed. Teachers have a retirement system which is financially sound with a good retirement board. Number 0524 REPRESENTATIVE DYSON questioned whether or not HB 164 would be a disincentive for a teacher to run for the legislature. He asked how it would be more of a disincentive than someone in another profession. He did not know of any professions which would allow someone to become a legislator and continue their retirement benefits. Number 0560 MR. CYR explained that there is a difference between a public and a private sector employee. A private sector employee is free to charge as much as they can for the services they provide. He mentioned that many legislators choose to continue their own business outside of the legislature, accruing the benefits of their retirement package. Public service employees do not have that luxury. Number 0612 REPRESENTATIVE DYSON felt that teachers could choose to work in whatever district had the best schools, the best living environment, the best wages or the best benefits. People could go other places to teach, just as private employees can go to other places to work. Number 0655 MR. CYR stated that he is familiar with the facts and figures about the salaries of Alaskan teachers. Nevertheless, this bill takes away the TRS incentive to become a legislator and remain in TRS. An employee who is in PERS can choose to remain in PERS when they become a legislator. Number 0694 REPRESENTATIVE DYSON asked why that group should have a better deal than 99 percent of employees in the state who are working in the private sector. Number 0703 MR. CYR felt that this bill punishes a class of public employees for some very specific reasons and this was patently wrong. General conclusions can be drawn between the public and the private sector of where it should fit, how it should move, how the public sector should be compensated and what the retirement benefits should be across the board. He felt this was an apples and oranges issue. Number 0750 REPRESENTATIVE DYSON felt the state has been rewarding one group. Number 0773 REPRESENTATIVE PORTER expressed surprise at the spectrum of benefits which have been accrued by state employees. When he left his former job he couldn't continue his retirement system. He did not feel that all public employees had the ability to continue in their retirement system. He clarified that a PERS employee could continue their retirement system while they served as a legislator. Number 0823 MR. CYR believed this statement to be true. Legislators have the option to remain in PERS if they were a former state employee. Number 0831 REPRESENTATIVE PORTER did not feel this was appropriate. Number 0836 CHAIRMAN BUNDE clarified that legislators can choose to be under PERS. He asked for information on the Anchorage School District. Number 0880 MR. CYR explained that some school districts have bargained personal leave, they will have four or five days of leave which can be used for personal absences. He did not know of any district which has wrapped those two kinds of leave together into sick leave. Sick leave is provided by statute, 13 days per year. This sick leave transfers from district to district. Number 0930 CHAIRMAN BUNDE announced that this is the first time the committee has heard HB 164 and it will be held in order to find out what various districts do with their sick leave policies.
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