Legislature(1995 - 1996)

05/01/1995 03:08 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 270 - RETIREMENT INCENTIVE PROGRAM                                        
 Number 312                                                                   
 CHAIRMAN KOTT asked the director from the Office of Management                
 and Budget (OMB) to give her comments on HB 270.                              
 OFFICE OF THE GOVERNOR, testified that HB 270 was one of the key              
 management tools the Administration was seeking to help OMB deal              
 with the state's current fiscal situation.  It also addresses the             
 downsizing of state government, not only in as financially                    
 effective way as possible, but to also address the needs of                   
 employees.  She said they have structured the program differently             
 than previous retirement incentive programs (RIP).  It is their               
 intention to use it in areas where the position would be not only             
 vacated but eliminated.                                                       
 MS. MCCONNELL said the same sort of program could be used by                  
 local governments and school districts, both of which have                    
 expressed interest in having the same kind of management tool                 
 available to them.  The initial plan was to restrict the RIP bill             
 only to those areas where the positions would be eliminated.                  
 However, they decided it was a good idea to leave open the                    
 possibility of replacing employees in certain situations where                
 they could demonstrate, within a three year time frame,                       
 significant savings.  This would be implemented in the area of 24             
 hour institutions, such as pioneer homes or corrections.  They                
 would be replacing the employees who are very high on the pay                 
 scale with employees at a lower range and step.  For example, a               
 guard currently at a 15J level would be replaced by an 11A, for a             
 savings of nearly half the total cost.  They shorten the period               
 during which the savings must be demonstrated to three years.                 
 They would also insist all costs be taken into account.                       
 MS. MCCONNELL pointed out there would be a need for substantial               
 reduction in positions over the next few years.  They have                    
 recommended a three year window and set it up so this would be                
 applied strategically.  She said this was the largest difference              
 between past RIP programs.  It is not an across the board RIP,                
 and it would only be used where it could be demonstrated to yield             
 a savings.  Departments would have to show this fit not only the              
 financial need for cost savings, but also their operational                   
 plans, so services would not be disrupted in order to grant                   
 RIP's.  It would not be at the discretion of the employee.  She               
 would be pleased to address questions the committee might have.               
 Number 384                                                                    
 REPRESENTATIVE ELTON asked if she was comfortable with the CS.                
 MS. MCCONNELL answered yes.  It was done as a result of inquiries             
 from local government.  The Administration surveyed and found                 
 they could handle the expected work load.                                     
 Number 388                                                                    
 REPRESENTATIVE KUBINA asked if she would object to adding the                 
 Judicial System.                                                              
 Number 390                                                                    
 MS. MCCONNELL said she would prefer that Mr. Bob Stalnaker speak              
 to the Judicial System question.                                              
 Number 393                                                                    
 REPRESENTATIVE KUBINA observed that on page 7, the window for the             
 school distinct plan was shorter than the window for the state                
 plan.  He asked if there was any reason not to expand the window              
 for school districts.                                                         
 Number 397                                                                    
 MS. MCCONNELL explained that they had problems with the                       
 mechanics.  Since Mr. Stalnaker was the administrator of this,                
 they had worked out the windows so not only would they fit some               
 over all purposes for downsizing, but also they could be sure the             
 Administration could meet its commitments on the administrative               
 end.  She said Mr. Stalnaker could speak best to that aspect.                 
 Number 403                                                                    
 REPRESENTATIVE ROKEBERG asked which sections held the provisions              
 for eliminating positions.                                                    
 Number 408                                                                    
 MS. MCCONNELL stated they didn't require that the position be                 
 eliminated, although that was their initial intent.  This was                 
 because of situations like correctional institutions, pioneer                 
 homes, and health and human services facilities which require 24              
 hour care.  They realized a substantial savings could still be                
 made even if they replaced those positions.  She noted they had               
 submitted a diagram to the State Affairs Committee which outlined             
 the steps they would go through to ensure a cost savings over the             
 three year time period.                                                       
 Number 433                                                                    
 REPRESENTATIVE MASEK asked if the Administration worked with                  
 State Affairs on the changes in the CS.                                       
 Number 438                                                                    
 MS. MCCONNELL answered yes.  The changes came from the hearing in             
 State Affairs where a number of communities testified they were               
 interested in having a wider window so they could use the RIP.                
 The initial reason for not having a wider window was they were                
 skeptical about being able to handle all of the administrative                
 work that would be required to do the RIP not only for state                  
 employees but also the political subdivisions.  As a result of                
 that hearing, the Department of Administration did a quick survey             
 of local communities to find out the work load they could expect.             
 They found they would be able to handle it.                                   
 Number 451                                                                    
 REPRESENTATIVE KUBINA asked if in Section 10 where the separation             
 incentive program was added, would those positions remain                     
 unfilled.  He also asked if there were positions that people                  
 wouldn't be retiring from, but just eliminating the position.                 
 Number 457                                                                    
 MS. MCCONNELL replied yes.  She said this was a provision she was             
 resistant about initially.  However, she spoke to private                     
 employers who pointed out that separation incentives are                      
 important because often it is the case that the places in need of             
 downsizing, or which present the greatest opportunity for                     
 savings, aren't necessarily the places where you have the oldest              
 employees.  There are situations where the separation incentive               
 can end up being less expensive for the state than the retirement             
 Number 477                                                                    
 CHAIRMAN KOTT inquired whether that the Administration had a goal             
 as to where they wanted to be in three to five years, as far as               
 Number 479                                                                    
 MS. MCCONNELL responded that the Administration had not yet                   
 pegged a specific dollar amount.  The long-range fiscal planning              
 commission which is now underway would help look at the issue.                
 She said coming in as a new Administration, they have not yet had             
 a chance to have the commissioners take a look at all the                     
 services out there and where the greatest opportunities for                   
 savings were located.  They also have not had a chance to look at             
 the statutory and regulatory requirements that they might want to             
 propose changing.  They plan on having an outline ready with the              
 next budget what addressing what they think makes sense                       
 concerning expenditures in the out years.                                     
 Number 510                                                                    
 REPRESENTATIVE SANDERS inquired if the example she used of level              
 15J being replaced by an 11A was a normal situation.  He thought              
 perhaps they would need to replace them with someone closer to                
 experience and longevity.                                                     
 Number 517                                                                    
 MS. MCCONNELL explained that people were moving up the career                 
 ladder with greater experience and training.  So, although the                
 person leaving would be at a 15J, the new person replacing him                
 would be at the bottom.  Other employees already would have gone              
 through those steps.  They wouldn't be replacing a large chunk of             
 experience with inexperienced people.  In the case of                         
 corrections, for example, you would still maintain the experience             
 and training in the work force to continue to get the job done                
 Number 531                                                                    
 CHAIRMAN KOTT commented on having sat through another session of              
 budget hearings, and most of the departments which testified                  
 commented they were stretching themselves thin.  The personnel                
 cuts, over the years, have gotten to the point where they can't               
 fulfill their statutorily required actions.  Without making                   
 substantial cuts in programs, he doesn't think the departments                
 can absorb any more personnel losses.                                         
 Number 546                                                                    
 MS. MCCONNELL concurred this was the general feeling among the                
 commissioners.  They've gotten to the point where they need to                
 address which functions are no longer as necessary as they have               
 been in the past.  She said the effort has begun, and in some                 
 area proposals are coming forward, such as with the Department of             
 Environmental Conservation (DEC).                                             
 Number 560                                                                    
 CHAIRMAN KOTT said this was commendable.  He added that with over             
 20,000 employees out there, he hoped the people advocating and                
 pushing this legislation wouldn't think for an instant they would             
 cut 5000 employees without wholesale changes in the way business              
 is conducted in the state.  The RIP will satisfy some                         
 requirements; however, they won't see a 20 percent reduction in               
 the state work force.                                                         
 MS. MCCONNELL agreed and added it was important not to have                   
 expectations out of line.  They want them to be challenging                   
 expectations, not unrealistic.                                                
 Number 568                                                                    
 REPRESENTATIVE SANDERS inquired if there were more state                      
 employees today than in May, 1994.                                            
 Number 569                                                                    
 MS. MCCONNELL replied she wasn't sure about the number for 1994.              
 There are places where there have been increases, such as in                  
 Child Support Enforcement.  There were 31 enforcement officers                
 added during the course of last year and many of those were added             
 with federal funds.  She said as the federal government changes               
 its requirements, they still don't know where these changes will              
 come.  However, they may affect areas of state government.  They              
 need to be prepared to address those.                                         
 Number 584                                                                    
 REPRESENTATIVE SANDERS asked if there were any significant areas              
 that were downsized.                                                          
 MS. MCCONNELL said she wasn't aware of one particular area where              
 the number went down.  There were more positions in this year's               
 budget than in last year's budget, attributable to a combination              
 of child support enforcement, totally revenue supported                       
 positions, and capital funded positions.                                      
 CHAIRMAN KOTT asked if there were more questions for Ms.                      
 McConnell.  Hearing none, he asked the representative from the                
 Alaska Marine Highway to join them at the table.                              
 Number 594                                                                    
 OF TRANSPORTATION AND PUBLIC FACILITIES, testified that all                   
 employees of the ferry system were members of the union.  The                 
 terms of the new contract are not as generous as the contracts                
 prior to 1986.  Her vacation benefit is $3,100 a year more than               
 employees hired at this time.  She said she is at the age where               
 she could continue working for another five or six years.  The                
 person replacing her would receive no more than 35 hours a month              
 vacation.  The employees working in this system would be younger,             
 receiving less benefits, supporting the economy, building homes,              
 sending their children to school and other things that would be               
 much more cost effective than older employees, who are not                    
 stimulating the Alaskan economy in such a manner.                             
 Number 611                                                                    
 JIM TEDFORD, PARENT, read the following statement:  "To whom it               
 may concern:  Alaska is no longer the land of plenty.  We all                 
 have to learn to get by with less, but we should try to minimize              
 the impact on our children.  Today most school districts are in a             
 financial bind.  Class sizes are growing and education is                     
 suffering.  HB 270 offers a partial solution to this crisis in                
 funding.  A retirement incentive program would free up thousands              
 of dollars that school districts could use to better educate our              
 children.  Please move HB 270 expeditiously through the                       
 legislative process so RIP can be in place before the end of the              
 school year.  Thank you."                                                     
 Number 624                                                                    
 REPRESENTATIVE KUBINA asked Mr. Bob Stalnaker, Director, Division             
 of Retirement and Benefits, Department of Administration, why on              
 page 7, lines 4 and 5, the time span for school districts was so              
 Number 629                                                                    
 DEPARTMENT OF ADMINISTRATION, answered that the time window is                
 the same as in the previous two RIPs.  It is designed to cover                
 two school years.                                                             
 TAPE 95-55, SIDE A                                                            
 Number 000                                                                    
 REPRESENTATIVE KUBINA asked if their plan had to be submitted                 
 between the end of June, and the end of the year, they then could             
 then retire at the end of this school year and the end of the                 
 next school year.                                                             
 MR. STALNAKER said this was correct.  By having a June 30, as the             
 application date, a person can apply and then be retired on July              
 1, for this school year.  By having it in July, they can apply                
 June 30 next year to be retired by July 1 of the following year,              
 which would give them the latitude of two school years.                       
 Number 018                                                                    
 REPRESENTATIVE KUBINA said he was thinking specifically of Delta              
 Junction, currently in the process of base closure over the next              
 three years.  Because they have the three year closure plan, he               
 asked if it would be objectionable to extend the date of August               
 1, 1996 to 1997.                                                              
 Number 034                                                                    
 MR. STALNAKER responded that first and foremost they have always              
 looked at this as a tool.  They have been diligent in making it               
 revenue neutral to the systems, by identifying the full cost up               
 front.  If the employer can better utilize the tool by extending              
 it another year for school districts, the retirement system                   
 wouldn't have an objection.  It would expand the number of                    
 teachers for all school districts which would qualify, giving                 
 them more latitude in phasing it through.                                     
 Number 048                                                                    
 REPRESENTATIVE KUBINA stated they would still have to file their              
 plan before the end of this calendar year.                                    
 MR. STALNAKER said this was correct.                                          
 Number 051                                                                    
 BUDGET, OFFICE OF THE GOVERNOR, stated that when the bill was                 
 being drafted, they discussed it with representatives from the                
 education community.  The concerns some school districts have                 
 with extending the window are that they have problems they need               
 to address now.  They want as many teachers who might be able to              
 participate now to do so, but teachers, given the option of                   
 another year, may stay on the payroll for another two years.                  
 School districts could address this by saying if they are                     
 eligible for the program they must use it now.  Only teachers not             
 eligible will be able to use it down the road.                                
 Number 074                                                                    
 MR. STALNAKER concurred with Mr. Kreinheder.  In previous RIPs,               
 some school districts have offered cash incentives to entice                  
 teachers to retire during the first year instead of the second.               
 He said they haven't heard from school districts that they don't              
 like the window.  They have heard from the employees that they                
 would like the longer window period in which to strategically use             
 it themselves.                                                                
 Number 091                                                                    
 REPRESENTATIVE KUBINA asked if he had an objection in including               
 the Judicial System in this bill.  He asked, "Are they under your             
 purview or are they a separate retirement system?"                            
 MR. STALNAKER responded that it was a separate retirement system,             
 but felt this would be fine.                                                  
 Number 101                                                                    
 MARK LIVINGSTON, testified from Ketchikan via teleconference in               
 support of HB 270.  He read the following statement:  "Recently               
 Ketchikan School District has had to cut many educational                     
 programs.   The school district is looking at a $200,000 plus                 
 deficit.  Next year, the funding unit will be at $61,000, and                 
 they're talking about a funding unit cut to $59,000.  Because                 
 classroom teaching positions are based on school enrollment,                  
 teaching positions cannot be eliminated or reduced much, at least             
 hopefully, more than it already has been.  If retiring teachers               
 are replaced with teachers at the low end of the pay scale,                   
 school districts will save a substantial amount of money.                     
 According to the Ketchikan School District business manager there             
 are approximately 40 teachers eligible to retire now.  If a                   
 retirement incentive program were passed, Ketchikan School                    
 District could save from $67,452 to $85,716 for each retiring                 
 teacher over a three year period.  Within the last decade, 75                 
 percent of the largest U.S. companies have offered early                      
 retirement options.  This comes out of U.S. News and World                    
 Report, dated November, 1991.  I think that's a pretty good                   
 endorsement considering corporate America's search for a better               
 bottom line.  The retirement incentive bill is one of the more                
 viable options available to save money.  Thank you."                          
 Number 139                                                                    
 GARY BLOOMQUIST, CITY MANAGER, CITY OF KODIAK, testified from                 
 Kodiak via teleconference.  He stated that in 1992, they made                 
 efforts to gear their budgeting and personnel policies to                     
 accomplish significant savings in the long term.  He said anyone              
 being replaced in Kodiak would be replaced at a step A rather                 
 than a step I.  In 1992, they eliminated longevity pay for all                
 new hires, expecting to get the benefit of the elimination of                 
 longevity pay over a seven to ten year period.  All new employees             
 would be hired with nine days less vacation per year.  In order               
 to budget and maintain minimal staffing levels they use overtime.             
 Beginning April 1, 1992, they established part payment for                    
 dependent medical coverage.  They have 32 people that would be                
 eligible out of a total employment force of 107.  The estimates               
 show that 16 of those would leave.  He said they would hate to                
 lose them all at one time.  He said he very much appreciates the              
 effort that has gone on in the House to extend the period and                 
 move the date to an earlier date.  It appears the savings for                 
 Kodiak in the first year would conservatively exceed $200,000.                
 They would like to take advantage of this as soon as possible.                
 The major concern they have is the Senate has merged SB 137 into              
 SB 148, and the savings could be denied to them if the retirement             
 bill alone isn't allowed to proceed as the retirement bill.  He               
 said they would appreciate any advice the committee might have,               
 and thanked them for their time.                                              
 Number 175                                                                    
 CHAIRMAN KOTT inquired how the two Senate bills were intertwined.             
 Number 177                                                                    
 MR. BLOOMQUIST replied, "As of this morning SB 137, which is the              
 House's HB 270 as was amended in the House and moved onto this                
 committee, was merged into SB 148 which, in effect, is a new                  
 retirement program.  There is now a single SB 148 and SB 137 has              
 gone no where.                                                                
 REPRESENTATIVES KOTT and Kubina both commented: "The plot                     
 Number 187                                                                    
 CHAIRMAN KOTT believed that bill to be in the Senate Finance                  
 Number 191                                                                    
 MR. BLOOMQUIST believed the bill passed out of the Finance                    
 Committee this morning.  He said their understanding was that SB
 148 is controversial enough and hasn't had the full discussion                
 that HB 270 has had and could possibly cause the demise of the                
 RIP bill.                                                                     
 Number 207                                                                    
 CHAIRMAN KOTT added that very seldom do they follow what's going              
 on in "the Dark Side".  He asked Representative Porter to                     
 comment, having chaired the subcommittee on HB 270.                           
 Number 213                                                                    
 REPRESENTATIVE PORTER stated the subcommittee of the State                    
 Affairs Committee came away with the impression that HB 270 was               
 designed to do exactly what they were touting it to do.  The                  
 mechanism is in place to review and make sure it does that.  The              
 bill doesn't guarantee the budgets of affected divisions and                  
 departments would go down.  That is the function of the                       
 legislature in the years to come, to take the reports HB 270                  
 requires to be submitted and find out if the budgets don't come               
 down, and what the cause is.                                                  
 Number 234                                                                    
 REPRESENTATIVE KUBINA offered Amendment 1, to include the                     
 Judiciary System.                                                             
 Number 247                                                                    
 CHAIRMAN KOTT objected for the purpose of discussion.                         
 REPRESENTATIVE KUBINA told the committee it would be the entire               
 Section 9.  This is the same language that was in the Senate                  
 Number 266                                                                    
 CHAIRMAN KOTT inquired if he was removing Section 9.                          
 REPRESENTATIVE KUBINA replied no.  He would be inserting in the               
 title the words:  "The Judicial Retirement System", and on page               
 7, line 20, adding the entire Section 9 of his amendment,  It                 
 would be adding a new Section 9, and renumbering the subsequent               
 Number 278                                                                    
 CHAIRMAN KOTT  asked if he was adding a new Section 8.                        
 REPRESENTATIVE KUBINA replied, a new Section 9.                               
 CHAIRMAN KOTT commented that starting at line 20 would be a new               
 Section 8.                                                                    
 Number 279                                                                    
 REPRESENTATIVE KUBINA apologized and said it would be a new                   
 Section 8 and 9.  However, he just wanted a new Section 9.                    
 Numb 290                                                                      
 CHAIRMAN KOTT said he could amend the amendment starting on page              
 1, line 27, insert the amendment of Section 9, and renumber the               
 subsequent sections.  He asked if this was the intent of the                  
 Number 297                                                                    
 REPRESENTATIVE KUBINA said this was correct.                                  
 CHAIRMAN KOTT asked if there was someone present from the Court               
 System who would like to comment on this.                                     
 Number 302                                                                    
 he hadn't yet seen the language in this amendment.  However, if               
 it was the same language as is contained in the Senate bill, it               
 would allow the administrative director of courts to participate              
 in the RIP if there is a savings to the state.  This language was             
 in the past two or three RIPs that had been introduced in the                 
 legislature.  If there isn't a monetary savings, the                          
 administrative director wouldn't be allowed to use the RIP.  This             
 has to be approved by the Chief Justice.  It doesn't give the                 
 administrative director anymore years towards retirement.  It                 
 just lets him get older.  This has been in the previous two RIP               
 bills, and the Senate put it in their version.  The Supreme Court             
 supports this.                                                                
 Number 319                                                                    
 CHAIRMAN KOTT asked if there were questions for Mr. Snowden and               
 added that it was Mr. Snowden's birthday.                                     
 Number 328                                                                    
 REPRESENTATIVE ROKEBERG asked if the rest of the Judicial System              
 was involved in this.                                                         
 MR. SNOWDEN replied no.  There would be no savings.  All other                
 court employees are in the bill under the Public Employees                    
 Retirement System (PERS).  There is an Administrative Director's              
 Retirement Act in the state.  To allow himself to participate in              
 the RIP, there has to be specific reference to that act.  It has              
 the same mandate as every other part of the bill.  If there's no              
 savings, it cannot be done.                                                   
 Number 337                                                                    
 CHAIRMAN KOTT asked if there was an objection to Amendment 1.                 
 Number 340                                                                    
 REPRESENTATIVE PORTER commented that it was his birthday tomorrow             
 and wondered what he was going to get.                                        
 Number 347                                                                    
 CHAIRMAN KOTT replied there would be no Labor and Commerce                    
 Committee meeting.  Hearing no objections to Amendment 1, it was              
 adopted.  He added that he planned on ordering a CS and bringing              
 it back before the committee on Wednesday.                                    
 Number 348                                                                    
 REPRESENTATIVE PORTER stated that he wouldn't resist moving HB
 270, as amended.                                                              
 Number 350                                                                    
 CHAIRMAN KOTT asked the committee members if they were                        
 comfortable with the incorporated language.                                   
 Number 353                                                                    
 REPRESENTATIVE ELTON said this was a straight forward amendment.              
 It comes from the "other side."  He didn't have a problem with                
 Number 355                                                                    
 REPRESENTATIVE KUBINA wondered what games were being played with              
 them changing the amendment.  He would like to see this make it               
 to the Finance Committee.                                                     
 Number 360                                                                    
 REPRESENTATIVE PORTER made a motion to move the CSHB 270(STA) as              
 amended, with accompanying fiscal notes.                                      
 Number 362                                                                    
 CHAIRMAN KOTT asked if there was an objection to moving the CSHB
 270(STA) as amended.  He noted the House Labor and Commerce                   
 Committee will work on a new CS in incorporating Amendment 1.  I              
 would then become CSHB 270(L&C).  Hearing no objection, the CSHB
 270(L&C) was moved.                                                           

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