Legislature(2021 - 2022)BARNES 124

04/19/2021 03:15 PM LABOR & COMMERCE

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Audio Topic
03:18:15 PM Start
03:18:54 PM Board of Professional Counselors
03:53:43 PM Board of Veterinary Examiners
04:04:37 PM HB75
04:28:16 PM HB61
05:11:10 PM HB85
05:15:24 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointees: TELECONFERENCED
- Alaska State Board of Public Accountancy:
Steven Jordan
- Board of Certified Direct Entry Midwives:
Tanya Kirk
- Board of Veterinary Examiners: Hal Gieger &
Scott Flamme
- Marijuana Control Board: Casey Dschaak,
Christopher Jaime, & Bruce Schulte
- Occupational Safety & Health Review Board:
Vincent Perez
- Real Estate Commission: Traci Heaton &
Elizabeth Schok
- Board of Professional Counselors: Dorene Hagen
-- Public Testimony --
*+ HB 75 EMPLOYER CONTRIBUTIONS TO PERS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+= HB 61 REGISTER COMMERCIAL INTERIOR DESIGNERS TELECONFERENCED
Moved CSHB 61(L&C) Out of Committee
-- Public Testimony --
+= HB 85 FINANCIAL INSTITUTIONS; LIABILITY TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
              HB 75-EMPLOYER CONTRIBUTIONS TO PERS                                                                          
                                                                                                                                
4:04:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced  that the next order  of business would                                                               
be HOUSE BILL NO. 75,  "An Act relating to employer contributions                                                               
to  the  Public  Employees'  Retirement  System  of  Alaska;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
4:05:08 PM                                                                                                                    
                                                                                                                                
NEIL  STEININGER,  Director,  Office of  Management  and  Budget,                                                               
Office of the  Governor, introduced HB 75 on behalf  of the House                                                               
Rules  Standing  Committee,  sponsor,   at  the  request  of  the                                                               
governor.   He characterized the proposed  legislation as "fairly                                                               
narrowly focused"  with the  intent of  giving the  state another                                                               
tool  for  its  financing  of   retirement  on  behalf  of  state                                                               
employees.  He  said the cap would be removed  on public employee                                                               
retirement  system payroll  contributions  made by  the State  of                                                               
Alaska as an  employer.  He said this would  continue to fund the                                                               
state's obligations  to the  Public Employees'  Retirement System                                                               
(PERS) and  only employs to the  State of Alaska as  an employer,                                                               
rather than apply to other PERS  employers.  He said it would not                                                               
impact  the teachers'  retirement system,  change any  retirement                                                               
benefits  or  employee  contributions,   or  reduce  the  overall                                                               
employer contributions.   Instead,  he said,  it would  allow the                                                               
state to "fully cost-share" the  cost of retirement contributions                                                               
for  state employees.    He  said it  would  reduce general  fund                                                               
expenditures by approximately $25.7 million in fiscal year 2022.                                                                
                                                                                                                                
4:07:11 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
4:07:36 PM                                                                                                                    
                                                                                                                                
MR. STEININGER presented a PowerPoint  [hard copy included in the                                                               
committee  packet] and  began  on slide  3,  "HB75    Background:                                                               
Alaska's   Retirement  Obligations,"   which   read  as   follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     ? The PERS unfunded liability  was estimated to be $4.6                                                                    
     billion in FY20                                                                                                            
                                                                                                                                
     ?  Current  annual  cost  to   pay  down  the  unfunded                                                                    
     liability is  split between employer  contributions and                                                                    
     the state assistance payment, or "on-behalf" payment                                                                       
          o   Employer  contributions   (22%)  on   employee                                                                    
     salaries  mixed     fund sources                                                                                           
          o On-behalf payments  for Municipalities and other                                                                    
     PERS      employers  100% UGF                                                                                              
          o  On-behalf payment  for State  of  Alaska as  an                                                                    
     employer       100% UGF                                                                                                    
                                                                                                                                
     ? This  bill addresses the on-behalf  payment for State                                                                    
     of Alaska as an employer                                                                                                   
                                                                                                                                
MR.  STEININGER presented  slide  4, "State  of  Alaska PERS  On-                                                               
Behalf  Payments," which  read as  follows [original  punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     ? In  2008, the legislature established  a uniform rate                                                                    
     for payroll contributions for all PERS employers  22%                                                                      
                                                                                                                                
     ?  The  State   of  Alaska  is  required   to  pay  the                                                                    
     difference    between     capped    employer    payroll                                                                    
     contributions and the  full actuarial liability (30.11%                                                                    
     in FY22)                                                                                                                   
          ?  Called  the  state  assistance  or  "on-behalf"                                                                    
     payment                                                                                                                    
                                                                                                                                
     ?  For FY22,  the total  on-behalf payment  to PERS  is                                                                    
     $193.5m (UGF)  ? $95.7m  of that amount is  made by the                                                                    
     state on behalf of  itself                                                                                                 
          ? The  remaining $97.8m is  made on behalf  of 153                                                                    
     other     active PERS employers                                                                                            
                                                                                                                                
MR. STEININGER presented  slide 5, "HB75   State of  Alaska as an                                                               
Employer Retirement  Obligation    Current Law,"  which displayed                                                               
the  state payroll  contribution  of 22  percent  of payroll,  or                                                               
$246.3  million.   He said  that figure  includes $106.3  million                                                               
from the unrestricted general fund  (UGF); $30.3 million from the                                                               
designated general fund (DGF); $73  million from "other" sources;                                                               
and $36.8 million from federal sources.                                                                                         
                                                                                                                                
4:11:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS asked what DGF sources are.                                                                                     
                                                                                                                                
MR. STEININGER  replied that DGF  sources are any DGF  funds that                                                               
the state is using for payroll.   He said the "on-behalf" portion                                                               
of $95.8 million is also from the unrestricted general fund.                                                                    
                                                                                                                                
4:11:38 PM                                                                                                                    
                                                                                                                                
MR. STEININGER continued  to slide 6, "HB75   State  of Alaska as                                                               
an  Employer   Retirement  Obligation     Proposed   Law,"  which                                                               
displayed  graphics showing  the  state  payroll contribution  of                                                               
30.11% of  payroll, totaling $342.2  million.  The  fund sources,                                                               
he said,  show decrease in  funding from  UGF and an  increase in                                                               
all other areas of contribution.   He said, "This is really where                                                               
the savings  from this concept  come from, because it  comes from                                                               
being able  to share those  costs with these other  payers, these                                                               
other funds that  pay for state employees."  He  pointed out that                                                               
the  "other"  category   includes  "capital  improvement  program                                                               
interagency   receipts,"  which   are   duplicative  funds   that                                                               
represent state  employees working  on capital projects,  such as                                                               
Department  of   Transportation  &  Public   Facilities  (DOT&PF)                                                               
employees.                                                                                                                      
                                                                                                                                
4:14:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SCHRAGE  asked  for confirmation  that  DGF  fund                                                               
sources  can  absorb  the  increased  pull  of  funds  under  the                                                               
proposed legislation.                                                                                                           
                                                                                                                                
MR.  STEININGER  pointed out  that  initial  estimates show  that                                                               
almost $55 million in UGF would be  saved.  He said that in terms                                                               
of DGF, agencies currently don't collect  as much as is spent, so                                                               
it doesn't make sense to further  draw down the fund.  The fiscal                                                               
note, he said,  swaps DGF with UGF funds to  ensure that programs                                                               
aren't negatively impacted.                                                                                                     
                                                                                                                                
4:15:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SPOHNHOLZ  asked for  an example  of an  appropriate DGF                                                               
increase.                                                                                                                       
                                                                                                                                
MR. STEININGER  explained that the  Alaska Marine  Highway System                                                               
funds pay  for other personnel services,  but revenue collections                                                               
for the  ferry system  can't be increased  to meet  the increased                                                               
costs; therefore, he said, the fiscal  note must be adjusted.  He                                                               
said the  focus was to  remain on areas  in which an  increase in                                                               
revenues could be implemented to reflect the program costs.                                                                     
                                                                                                                                
CO-CHAIR   SPOHNHOLZ  summarized   her  understanding   that  the                                                               
intention  is  to  make  sure that  no  programs  are  negatively                                                               
impacted; if HB  75 passes, she said,  a staggered implementation                                                               
would  allow each  program to  renegotiate individual  contracts.                                                               
She pointed  out that  Mr. Steininger  had identified  the Alaska                                                               
Marine Highway  System as a program  that uses DGF and  asked for                                                               
confirmation that he's not proposing  a fare increase in order to                                                               
reduce UGF spending for PERS.                                                                                                   
                                                                                                                                
MR. STEININGER  replied that he  was only using the  ferry system                                                               
as an example  to show that adding the cost  wouldn't be absorbed                                                               
within current  revenue collections.   He said  he used it  as an                                                               
example  of an  area  in which  there has  been  special care  to                                                               
ensure that  programs aren't negatively affected  by the proposed                                                               
legislation; instead, it's simply  a back-end financing change to                                                               
allow more revenue collection from the federal government.                                                                      
                                                                                                                                
CO-CHAIR  SPOHNHOLZ asked  whether  a percentage  of the  federal                                                               
highway funds  related to the marine  highway system's retirement                                                               
match would come from UGF.                                                                                                      
                                                                                                                                
MR. STEININGER replied, "That's correct."                                                                                       
                                                                                                                                
4:18:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MCCARTY  asked for clarification  on renegotiating                                                               
contracts.                                                                                                                      
                                                                                                                                
MR.  STEININGER responded  that  the  renegotiation would  happen                                                               
within  the   cost  allocation  plan  agreements,   which  aren't                                                               
contracts  in   the  procurement  sense  but   with  the  federal                                                               
government.                                                                                                                     
                                                                                                                                
CO-CHAIR SPOHNHOLZ  commented that  "grant agreement" might  be a                                                               
better term than "contract."                                                                                                    
                                                                                                                                
4:19:26 PM                                                                                                                    
                                                                                                                                
MR. STEININGER  presented slide 7, "HB75:  FY2022 Budget Impact,"                                                               
which displayed the  budget impact by fund source  and by agency.                                                               
He  pointed  out  that,  since  $100 million  in  state  cost  is                                                               
normally  included  in  the language  section  of  the  operating                                                               
budget and  shifted into  agency budgets, it  would appear  as an                                                               
increase in the agency budgets if  one were to look at the budget                                                               
without  adjusting for  the shift.   He  clarified that  it's not                                                               
actually  an increase  in true  cost to  the agency,  it's simply                                                               
reflecting the cost in the same  manner in which it was incurred.                                                               
He pointed  out that agencies  with a large number  of positions,                                                               
as well  as federal  programs, would  contribute the  majority of                                                               
UGF  savings.    He  then presented  slide  8,  "Historical  PERS                                                               
Contribution  Rates,"  which  displayed a  timeline  showing  the                                                               
employer  rate of  22 percent  contribution  versus the  variable                                                               
actuarial rate.   He said the  volatility of the rate  has always                                                               
been absorbed within  the language section of the  budget bill in                                                               
the  "on behalf"  payments,  and this  volatility  would show  up                                                               
within agency  budgets should  HB 75  pass.   He said  the budget                                                               
system  includes a  mechanism to  respond to  the volatility  and                                                               
keep it from impacting state programs.                                                                                          
                                                                                                                                
4:21:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SPOHNHOLZ  asked why  there  exists  volatility in  the                                                               
actuarial rate.                                                                                                                 
                                                                                                                                
MR. STEININGER  explained that  volatility is  primarily affected                                                               
by market returns on the fund.   The actuarial rate is calculated                                                               
by looking  at how much  money is in  PERS; whether the  fund has                                                               
met, exceeded, or  fell short of projections over  the past year;                                                               
and  the  projected  cost  of  retirement  payments.    Once  the                                                               
unfunded liability  is determined,  he said, it's  amortized over                                                               
25 years and the actuarial rate is determined.                                                                                  
                                                                                                                                
CO-CHAIR SPOHNHOLZ asked whether  reducing the unfunded liability                                                               
would reduce the actuarial rate.                                                                                                
                                                                                                                                
MR. STEININGER responded  that there was a large  deposit to PERS                                                               
in 2015; while  the actuarial rate was already  trending down, he                                                               
said,  there  was  a  continued   drop  after  the  contribution.                                                               
Anything that  reduces the  unfunded liability,  whether it  be a                                                               
contribution to PERS or a policy  change, he said, would help the                                                               
actuarial rate.                                                                                                                 
                                                                                                                                
CO-CHAIR SPOHNHOLZ asked for the amount of the deposit.                                                                         
                                                                                                                                
MR. STEININGER replied that it was approximately $3 billion.                                                                    
                                                                                                                                
CO-CHAIR SPOHNHOLZ noted that in 2015  the price of oil was high,                                                               
and Senate Bill  21 [passed during the  Twenty-Eight Alaska State                                                               
Legislature]  had not  yet reduced  state revenues  from the  oil                                                               
industry.  She surmised that there  is a cost associated with not                                                               
addressing the unfunded liability.                                                                                              
                                                                                                                                
MR. STEININGER expressed  that the statement was fair.   He noted                                                               
that there  are multiple ways  to pay for the  state's retirement                                                               
obligation.                                                                                                                     
                                                                                                                                
CO-CHAIR  SPOHNHOLZ  said that  the  unfunded  liability is  $4.6                                                               
billion in fiscal year 2020, so there's a gap.                                                                                  
                                                                                                                                
MR. STEININGER replied, "That's correct."                                                                                       
                                                                                                                                
CO-CHAIR SPOHNHOLZ  clarified that  the unfunded liability  is in                                                               
addition   to  the   approximately  $16   billion  owed   to  the                                                               
constitutional  budget reserve.   She  said that  while there  is                                                               
currently  a  statutory permanent  fund  dividend  on the  books,                                                               
there is a structural fiscal gap.                                                                                               
                                                                                                                                
4:26:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS  asked for information on  any consultations with                                                               
public employee unions.                                                                                                         
                                                                                                                                
MR. STEININGER  replied that unions  were consulted  and informed                                                               
of this  policy, and  he clarified  that HB  75 would  not impact                                                               
benefits or employee contributions  because it's entirely a "back                                                               
end"  issue.   He  said  the  Alaska  Municipal League  has  been                                                               
contacted, but this proposed legislation  is focused on the State                                                               
of Alaska as an employer.                                                                                                       
                                                                                                                                
CO-CHAIR  FIELDS  suggested  hearing testimony  from  the  Alaska                                                               
State Employees Association.                                                                                                    
                                                                                                                                
[HB 75 was held over.]                                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
HB 75 v. A 2.8.21.PDF HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 Sectional Analysis & Reference Statutes 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 Retirement Contribution Examples Handout C 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 PERS 4.19.2021 Presentation.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 FY2022 Budget Impact Handout A 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 FY2022 Fund Source Summary Handout B 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 FY22 Estimated Additional State Contribution PERS Handout D 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 Fiscal Note RET-PERS 3.8.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 Fiscal Note VAR-ALL 3.10.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 75 Fiscal Note DOA-DRB 3.8.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 75
HB 61 Opposition Testimony - Received as of 4.16.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 61
HB 61 Support Testimony - Received as of 4.16.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 61
HB 61 Amendment #1.pdf HL&C 4/19/2021 3:15:00 PM
HB 61
HB 85 State and National Bank Regulation Comparison 04.13.2021.pdf HL&C 4/19/2021 3:15:00 PM
HB 85
Steven Jordan Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Steven Jordan Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Tanya Kirk Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Tanya Kirk Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Traci Heaton Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Vincent Perez Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Bruce Schulte Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Casey Dschaak Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Christopher E. Jaime Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Dorene Hagen Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Elizabeth Schok Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Elizabeth Schok Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Hal Geiger Resume_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Scott Flamme Board Application_Redacted.pdf HL&C 4/19/2021 3:15:00 PM
Blank CSHB 85 work draft version I.pdf HL&C 4/19/2021 3:15:00 PM
HB 85
HB 85 Summary of Changes version B to version I 04.19.2021.pdf HL&C 4/19/2021 3:15:00 PM
HB 85
HB 61 Letters of Opposition as of 4.19.21.pdf HL&C 4/19/2021 3:15:00 PM
HB 61