Legislature(2005 - 2006)CAPITOL 106
04/19/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 12 | TELECONFERENCED | |
| += | SB 141 | TELECONFERENCED | |
| += | HB 238 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 19, 2005
8:08 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Carl Gatto, Vice Chair
Representative Jim Elkins
Representative Bob Lynn
Representative Jay Ramras
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative John Harris
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 141(FIN)
"An Act relating to the teachers' and public employees'
retirement systems and creating defined contribution and health
reimbursement plans for members of the teachers' retirement
system and the public employees' retirement system who are first
hired after July 1, 2005; relating to university retirement
programs; establishing the Alaska Retirement Management Board to
replace the Alaska State Pension Investment Board, the Alaska
Teachers' Retirement Board, and the Public Employees' Retirement
Board; adding appeals of the decisions of the administrator of
the teachers' and public employees' retirement systems to the
jurisdiction of the office of administrative hearings; providing
for nonvested members of the teachers' retirement system defined
benefit plans to transfer into the teachers' retirement system
defined contribution plan and for nonvested members of the
public employees' retirement system defined benefit plans to
transfer into the public employees' retirement system defined
contribution plan; providing for political subdivisions and
public organizations to request to participate in the public
employees' defined contribution retirement plan; and providing
for an effective date."
- HEARD AND HELD
HOUSE JOINT RESOLUTION NO. 12
Proposing amendments to the Constitution of the State of Alaska
relating to the repeal of the budget reserve fund.
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 238
"An Act relating to contribution rates for employers and members
in the defined benefit plans of the teachers' retirement system
and the public employees' retirement system and to the ad-hoc
post-retirement pension adjustment in the teachers' retirement
system; requiring insurance plans provided to members of the
teachers' retirement system, the judicial retirement system, the
public employees' retirement system, and the former elected
public officials retirement system to provide a list of
preferred drugs; relating to defined contribution plans for
members of the teachers' retirement system and the public
employees' retirement system; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 141
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
SPONSOR(s): FINANCE
03/14/05 (S) READ THE FIRST TIME - REFERRALS
03/14/05 (S) FIN
03/16/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/16/05 (S) Heard & Held
03/16/05 (S) MINUTE(FIN)
03/17/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/17/05 (S) Heard & Held
03/17/05 (S) MINUTE(FIN)
03/21/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/05 (S) Heard & Held
03/21/05 (S) MINUTE(FIN)
03/22/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/22/05 (S) Heard & Held
03/22/05 (S) MINUTE(FIN)
03/23/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/23/05 (S) Heard & Held
03/23/05 (S) MINUTE(FIN)
03/29/05 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/29/05 (S) Heard & Held
03/29/05 (S) MINUTE(FIN)
03/30/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/30/05 (S) Heard & Held
03/30/05 (S) MINUTE(FIN)
03/31/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/31/05 (S) Heard & Held
03/31/05 (S) MINUTE(FIN)
04/01/05 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/01/05 (S) Heard & Held
04/01/05 (S) MINUTE(FIN)
04/02/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/02/05 (S) Heard & Held
04/02/05 (S) MINUTE(FIN)
04/03/05 (S) FIN AT 10:00 AM SENATE FINANCE 532
04/03/05 (S) Heard & Held
04/03/05 (S) MINUTE(FIN)
04/04/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/04/05 (S) Scheduled But Not Heard
04/05/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/05/05 (S) Heard & Held
04/05/05 (S) MINUTE(FIN)
04/06/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/06/05 (S) Moved CSSB 141(FIN) Out of Committee
04/06/05 (S) MINUTE(FIN)
04/08/05 (S) FIN RPT CS 5DP 1DNP 1AM
NEW TITLE
04/08/05 (S) DP: GREEN, WILKEN, BUNDE, DYSON,
STEDMAN
04/08/05 (S) DNP: HOFFMAN
04/08/05 (S) AM: OLSON
04/12/05 (S) ENGROSSED
04/14/05 (S) TRANSMITTED TO (H)
04/14/05 (S) VERSION: CSSB 141(FIN)
04/14/05 (H) READ THE FIRST TIME - REFERRALS
04/14/05 (H) STA, FIN
04/14/05 (H) STA AT 8:00 AM CAPITOL 106
04/14/05 (H) <Pending Referral>
04/16/05 (H) STA AT 9:30 AM CAPITOL 106
04/16/05 (H) <Bill Hearing Canceled>
04/19/05 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
SENATOR BERT STEDMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 141 as sponsor.
MELANIE MILLHORN, Director
Health Benefits Section
Division of Retirement & Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of the
division during the hearing on SB 141.
GINGER EVENS
Petersburg, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
DORIS TANNER
Willow, Alaska
POSITION STATEMENT: Testified on behalf of herself to urge the
committee to postpone a decision on SB 141 until further
research has been conducted.
CONTESSA GOSSETT
Palmer, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
ANDREA ANDREWS
Palmer, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
KEVIN BRENNAN
Kodiak, Alaska
POSITION STATEMENT: Testified on behalf of himself in
opposition to SB 141.
PAT HOLMES
Kodiak, Alaska
POSITION STATEMENT: Asked the committee to put off a decision
regarding SB 141 until further information and options have been
considered.
CARLENE AUGE
Salcha, Alaska
POSITION STATEMENT: Testified on behalf of herself during the
hearing on SB 141.
BONNIE SULLIVAN
Fairbanks, Alaska
POSITION STATEMENT: Offered comments and concerns about SB 141.
TIM VIAVANT
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 141.
SCOTT LEIGH
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 141.
MARTIN BRANVILLE
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141.
JEFF JABUSCH, Finance Director
City of Wrangell
Wrangell, Alaska
POSITION STATEMENT: Testified during the hearing on SB 141 to
express that the bill is generally on the right track.
BOB PLUNELLA, City Manager
City of Wrangell
Wrangell, Alaska
POSITION STATEMENT: Indicated his concurrence with the
testimony of Mr. Jabusch, during the hearing on SB 141.
LESLIE SIMMONS
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of herself and the
southcentral state supervisors [APEA AFT-SU] during the hearing
on SB 141.
PAT LUBY, Advocacy Director
AARP-Alaska
Anchorage, Alaska
POSITION STATEMENT: Discussed the consequences of switching
from a defined benefit plan to a defined contribution plan,
during the hearing on SB 141.
STACY OATES
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of herself to relate
three main issues she has with SB 141, and to ask the
legislature to slow down it's process.
STEVE HOFFMAN
Ketchikan, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141, and warned that a new tier may erode the
capability of the state to attract good employees.
CHARLIE ARTEAGA
Ketchikan, Alaska
POSITION STATEMENT: Testified on behalf of himself in
opposition to portions of SB 141, including those related to
changing to a defined benefit plan and lowered medical benefits.
DUANE MORAN, President
Anchorage Council of Education
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of the council during
the hearing on SB 141, and said a defined contribution plan
would make it easier for employees to leave the state.
SANDRA BESSER, President
Fairbanks North Star Borough Employee Association
Local 6125 APEA AFT
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 141.
BURNS COOPER
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141 to address issues regarding recruitment,
retention, and the challenges of saving for retirement.
GERRY GUAY, Chair
Southcentral chapter, state supervisory, [APEA AFT-SU]
Cordova, Alaska
POSITION STATEMENT: Testified during the hearing on SB 141, and
related concerns regarding the benefits and recruitment.
SANDRA BOATWRIGHT
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
PAULETTE WILLE
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
VIOLA "VI" JERREL, Ph.D.
Homer, Alaska
POSITION STATEMENT: Testified in opposition to SB 141.
TIM JESTER
No address provided
POSITION STATEMENT: Testified on behalf of himself in
opposition to SB 141.
LUKE HOPKINS
Fairbanks, Alaska
POSITION STATEMENT: Suggested that the committee consider
holding SB 141 through the interim and establishing a review
committee that would move around the state and take testimony
from the public.
MIKE DAVIDSON
No address provided
POSITION STATEMENT: Testified on behalf of the Alaska
Professional Fire Fighters Association in opposition to SB 141.
BEN STEWART
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141, and asked the committee to slow the process
down and listen to constituents.
MIKE HARBAUGH
Palmer, Alaska
POSITION STATEMENT: Testified on behalf of himself in
opposition to SB 141.
JOE DINNOCENZO
Kodiak, Alaska
POSITION STATEMENT: Testified on behalf of himself to address
the issue of recruitment and retention as it relates to SB 141.
JOHN DICKENSON
Anchorage, Alaska
POSITION STATEMENT: Testified as a supervisory employee
representative to APEA AFT-SU, during the hearing on SB 141.
ROSS MARLEY
Homer, Alaska
POSITION STATEMENT: Testified on behalf of himself in
opposition to SB 141.
BARBARA RICH
Fairbanks, Alaska
POSITION STATEMENT: Testified on behalf of herself during the
hearing on SB 141, and answered questions from the committee.
JIM DUNCAN, Business Manager
Alaska State Employees' Association (ASEA)
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of the approximately
8,000 current active ASEA members in opposition to SB 141.
DOUG STARK, DPA
Homer, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141.
MARY GRAHAM
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of herself in
opposition to SB 141.
KEVIN RITCHIE, Executive Director
Alaska Municipal League (AML)
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of AML in support of
the efforts being made by the legislature, and to explain the
percentage increases being faced by municipalities.
TOM BRICE
Alaska State District Council of Laborers
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the council and
answered questions from the committee during the hearing on SB
141.
JIM HORNADAY, Mayor
City of Homer
Homer, Alaska
POSITION STATEMENT: Testified in support of some provisions in
SB 141.
TOM HARVEY, Executive Director
NEA-Alaska
Anchorage, Alaska
POSITION STATEMENT: On behalf of NEA-Alaska, made suggestions
for changes to SB 141 and answered questions from the committee.
RON KING
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 141, to discuss the issue of competition from the
private sector, and to answer questions from the committee.
BETH WYTHE
Homer, Alaska
POSITION STATEMENT: Testified on behalf of herself to express
concerns regarding SB 141.
KEVIN BROOKS, Deputy Commissioner
Office of the Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of the
department during the hearing on SB 141.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House State Affairs Standing
Committee meeting to order at 8:08:51 AM. Representatives
Gatto, Elkins, Ramras, and Seaton were present at the call to
order. Representatives Lynn, Gardner, and Gruenberg arrived as
the meeting was in progress.
SB 141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS
CHAIR SEATON announced that the first order of business was CS
FOR SENATE BILL NO. 141(FIN), "An Act relating to the teachers'
and public employees' retirement systems and creating defined
contribution and health reimbursement plans for members of the
teachers' retirement system and the public employees' retirement
system who are first hired after July 1, 2005; relating to
university retirement programs; establishing the Alaska
Retirement Management Board to replace the Alaska State Pension
Investment Board, the Alaska Teachers' Retirement Board, and the
Public Employees' Retirement Board; adding appeals of the
decisions of the administrator of the teachers' and public
employees' retirement systems to the jurisdiction of the office
of administrative hearings; providing for nonvested members of
the teachers' retirement system defined benefit plans to
transfer into the teachers' retirement system defined
contribution plan and for nonvested members of the public
employees' retirement system defined benefit plans to transfer
into the public employees' retirement system defined
contribution plan; providing for political subdivisions and
public organizations to request to participate in the public
employees' defined contribution retirement plan; and providing
for an effective date."
SENATOR BERT STEDMAN, Alaska State Legislature, presented SB 141
as sponsor. He reviewed that several years ago, some actuaries
asked another actuary group to perform an actuarial audit, the
result of which was that there were some adjustments to the
liability portion of the state retirement plan that caught the
state, school system, and municipalities by surprise. The
liabilities in one year jumped up a few billion dollars, and
people wanted to know why. Last year was the second year that
the numbers were "out" and, with no plan in place to deal with
the escalations, the legislature approached the administration,
who began a process of having the boards that oversee the
retirement systems consider possible alternatives, solutions, or
recommendations.
8:13:48 AM
SENATOR STEDMAN said the boards looked for comparisons with
other states and with major competitors in the state, and they
produced two new tier proposals: one was a 100 percent defined
contribution plan, and the other was a combination of a defined
contribution plan and a defined benefit plan. He offered his
understanding of the history of the events that occurred between
that time and the present. He said this issue affects every
employee and those retired.
8:16:56 AM
SENATOR STEDMAN said the Senate Finance Committee took both
plans and started the process of finding the pros and cons of
each. He said the first two goals of that committee were to:
address the issue of retention and remain competitive, not only
in Alaska, but also in the Northwest.
8:18:54 AM
SENATOR STEDMAN remarked that the existing Tier I retirement
plan is "extremely rich." Some adjustments were made in
compiling the Tier II plan, and still further adjustments were
made to create the Tier III plan. He said [the Senate Finance
Committee] chose to use a 100 percent defined contribution plan,
because it felt it was more portable. He noted that today's
employees typically have multiple careers and move around a lot.
He stated that, over the last decade, the federal government has
modified the retirement rules to make things more portable
between the different retirement plans and systems that it has
around the country. Senator Stedman said there are some
liability issues with a defined contribution plan that "we're
all struggling with." He clarified that there is little ability
to move and adjust the current tier structures. He noted that
the defined contribution plan, on the other hand, is much more
flexible; it allows the employer to respond in the event that
there are financial conditions - both positive and negative - or
in the event that "you become at a disadvantage in attracting or
retaining your employees."
8:22:10 AM
SENATOR STEDMAN acknowledged that the House State Affairs
Standing Committee began a process similar to the Senate's in
reviewing alternative plans. He observed that there are many
similarities between the House's bill and SB 141. Both bodies
began with plans from the tier review committee and moved
forward from there.
8:23:27 AM
SENATOR STEDMAN addressed the key issues of the plan. He
directed attention to a handout in the committee packet entitled
the "CSSB 141(FIN) Walkthrough," and indicated that he would
offer a synopsis of it. He stated his intent is to provide some
background information because there seems to be a lot of
misinformation concerning the issue.
SENATOR STEDMAN listed the key elements of SB 141: to establish
a defined contribution plan, a retiree medical benefit plan, and
a health reimbursement arrangement; to replace the [Public
Employees' Retirement System (PERS)] board, the [Teachers'
Retirement System (TRS)] board, and the [Alaska State Pension
Investment Board (ASPIB)] with a new, 9-member Alaska Retirement
Management Board; to establish the new board's role to balance
the assets and liabilities, possibly over a decade or two; to
transfer the quasi-judicial responsibility of hearing appeals to
the Office of Administrative Hearings [within the Department of
Administration]; to transfer to the commissioner of
administration the responsibility for adopting system
regulations, and review and waver requests; and to set the
actuarial computed normal cost rate as a floor to the annual
employer contribution rates.
SENATOR STEDMAN listed the benefits of SB 141: to strengthen
management in fiduciary oversight; to improve the ability to
protect and control costs; to provide near-term financial relief
to employers; and to pave the way for developing a long-term
financial fix. He said the bill would not address the under
funding liability of $5.7 billion. He explained the reason for
that is that there are structural problems with how the system
is set up, and if the state pours hundreds of millions of
dollars into the problem, it will never be fixed. He said there
is a two-step process. The first step is to restructure the
board system to have more accountability and control, and the
second is to ask the new board to do a review and return to the
legislature with recommendations next year.
8:28:43 AM
SENATOR STEDMAN said the following was done over the last year:
employer surveys, member focus groups, benchmarking benefit
levels, demographic projections, implications of Medicare
changes, consideration of trans issues and alternatives, and
cost analyses and projections. Senator Stedman made comparisons
between the current and proposed plans. Under the current plan,
the benefit is based on salary and length of service and is
"paid to life" and to the survivors, which may or may not be a
benefit to the employer. Under the proposed plan, the benefit
would be based on the amount of money invested and what is
earned over time and is paid until such time as the funds run
out or the money is transferred to the retiree's heirs. He
mentioned that the defined contribution plan is portable; it can
be rolled over to the next generation. Senator Stedman said the
future benefit payments under the defined benefit plan are not
affected by the plan funding level; it makes no difference to
the beneficiaries under the current plan if the plan is over or
under funded. He said the liabilities of the school system are
basically pushed back to the state, because of the constitution.
The liabilities of the municipalities are not an obligation of
the state; however, at times when there is substantial distress
within the finance community on issues like this, the state has
the obligation to step up and help.
8:32:21 AM
SENATOR STEDMAN said PERS and TRS are examples of a defined
benefit plan, while the state's supplemental benefit plan (SBS)
is an example of a defined contribution plan. He said the
advantages of the defined benefit plan are the pooling of
longevity risk, a guarantee of income stream, and that the
system favors longer service and older employees. The
advantages to the defined contribution plan are its portability,
the fact that it's self directed and predictable - particularly
regarding cash flow to the employer, and its stable costs and
lower long-term administrative costs. The challenges on the
current system are that the employer bears all the investment
risk, the liabilities have to be estimated, health care costs
are rising, and other costs are uncontrollable. The
disadvantages to the defined contribution plan are that the
employee bears the investment risk and there must be employee
education and accurate retirement planning.
8:34:46 AM
SENATOR STEDMAN noted that the contribution rate is the simple
percentage of payroll required to pay the benefits earned. He
said currently it's split approximately 60/40, but SB 141 would
adjust that split to roughly a 50/50 split at "50 basis points
per year change," which he said is one half of 1 percent. It
does not include the past service cost or the unfunded liability
- that's the responsibility of the employer, which is [the
state]. He continued as follows:
That change for the average [PERS] employee earns
$43,800 a year. The first year it's going to cost
them $18 before tax - roughly $14 after tax. After
it's fully implemented over 6 years, the change before
tax is $121 a month - after tax is about $96. In
today's dollars it's $81 a month. And that's before
collective bargaining works its magic. And we all
understand how that works .... The TRS numbers are
fairly similar. The average TRS employee's right
under $54,000. It would cost, the first year, $22 a
month - after ... tax about $18 per month. After it's
fully implemented, $125 - in today's dollars about $86
- and it would take five years to get there.
8:37:06 AM
SENATOR STEDMAN said SB 141 would place the system assets and
liabilities with one board and increase the frequency of review
any time there is "a reporting and adopting of the actuarial
assumptions." The bill would also increase the employer
representation on the board. He explained that the employer has
the ultimate responsibility for the liabilities and needs to be
"plugged in" and have more influence on calling the shots,
because when things go wrong, the employer is the one that has
to come to the table and cover the liabilities. He stated that
the bill would establish minimum professional qualifications of
the board. He said it's no benefit to the employer to have a
board that doesn't spend much time dealing with the actuarial
issues involved.
SENATOR STEDMAN reiterated that the bill would move the appeal
process to the Office of Administrative Hearings and power the
commissioner of the Department of Administration to do the day-
to-day and system operations. He noted that currently the PERS
and TRS Boards spend roughly 80 percent of their time on
appeals; as a result, 80 percent of what those boards do will
disappear. The other two responsibilities of the board are to
set the employer contribution rate and accept the actuarial
assumptions. Those two functions belong in the group that
manages the assets, he said, thus those two items would be
shifted to the new board and the entire work of the PERS and TRS
Boards would disappear. He said there is a classic asset and
liability mismatch, much like when the savings and loan
associations "all went broke."
8:40:56 AM
SENATOR STEDMAN addressed the health reimbursement arrangement
(HRA). He noted that currently, if a person is qualified to
retire, the state picks up the health insurance "from there
forward." Under the proposed plan, the state would pick up the
health benefit cost when the person reaches Medicare
eligibility, which currently is age 65. The plan has a health
reimbursement arrangement to supplement the insurance premiums,
if needed. Employer contributions would be set at 2 percent of
the average PERS group salary and would go "into the pot." He
explained that that is a 100 percent employer contribution that
compounds, tax-deferred, and comes out tax-free. Contributions
would be recorded on an individual account balance, managed by
the new Alaska Retirement Management Board, with interest
credited annually. The reimbursement would be limited to the
individual's account balance until it's exhausted, and
terminated employees would forfeit the right to individual
accounts, unless they are reinstated back into the work force
[within] five years. He said there is a lot of federal control
regarding health reimbursement; basically the only thing the
legislature can do is to change the contribution amount.
8:42:59 AM
SENATOR STEDMAN said the proposed legislation also focuses on
trying to control liability costs. He said a lot of that
control should not be set in legislation, but should be left up
to the board. He stated that the contribution level or benefit
formulas between the employer and employees would be 11.5
percent a year, but that may be amended. He said the vesting
schedule won't affect the employees, but there would be a 5-year
vesting schedule for employers. He offered his understanding
that an amendment may be offered to shorten that time. He said
the bill has a five-year vesting schedule, which is "zero the
first year [and] escalates 25 percent a year for the next four
years." He explained that that is a claim that the employee has
on the employer contributions upon separation in that time
frame. He said the employer contribution into the defined
contribution amount is 4.25 percent, plus 1.75 percent for
medical and 2 percent for health reimbursement. The total cost
of the employer is 8.25 percent.
8:45:53 AM
SENATOR STEDMAN said:
There is a smaller liability issue with the medical,
being that we assume, as a state, at age 65. So, we
get rid of the actuarial work out of the retirement
plan for virtually all of it, except for that one
component. We still need some actuarial assumptions
and drivers ... driven to make sure that we fund [at
the] appropriate level to deal with that.
SENATOR STEDMAN said the medical plan would be the same no
matter what tier level a person is.
8:46:21 AM
SENATOR STEDMAN mentioned the subject of the proposed board
restructuring, but suggested that that subject be saved for
later.
8:47:38 AM
REPRESENTATIVE RAMRAS stated his support of SB 141. He noted
that he participated in a town hall meeting in Fairbanks last
weekend, in which he tried to suggest that if the retired
teachers present had been on a defined contribution plan in the
60s, their retirement would likely be better today than it is as
a result of the defined benefit plan. He asked if that was an
accurate suggestion.
8:49:35 AM
SENATOR STEDMAN said he thinks that statement is true.
8:49:45 AM
CHAIR SEATON said the committee would get into that topic later.
He said the answer to that question depends on the level of
contribution into the defined contribution plan.
8:50:05 AM
REPRESENTATIVE LYNN said he thinks the consolidation of boards
is probably a good idea, but he doesn't understand the need to
change the balance of the makeup of the board. He asked how the
state compares with other state boards' return of investments.
He stated that he is also concerned that the proposed
composition of the board may be too top heavy, and he indicated
that he would like to see more of a balance in the parties
involved. He said that issue will likely determine how he votes
on the bill.
8:52:02 AM
SENATOR STEDMAN indicated that the proposed reorganization of
the boards is "not a personality issue," but has to do with the
fact that SB 141 will make the individual PERS and TRS Boards
unnecessary for the reasons that he previously stated. He said
it's a legitimate question to ask if the employees are
adequately represented on the board. He asked the committee to
keep in mind that the liabilities are borne by the employer, not
the employee. He noted that under the current board structure
there are three independent members that are not beneficiaries
who have not worked for the state, schools, or municipalities.
He stated, "The benchmark has been raised for the qualifications
to sit on the board." He reemphasized the importance of
grasping the issue of assets and liabilities.
8:56:32 AM
REPRESENTATIVE LYNN said it is important to keep employment in
the state attractive. He says he has no problem having a public
member on the board, but three may be "overkill."
8:57:34 AM
SENATOR STEDMAN said none of the appeal work would be heard by
the board, but would be heard by administrative judges.
8:58:30 AM
REPRESENTATIVE GATTO offered an example of an employee who quits
after four years. He asked what that employee would get.
8:59:17 AM
SENATOR STEDMAN answered that that employee would get all
his/her individual contributions. He added, "Plus, on the
vesting schedule, at four years, you would get most of the
employer's." He estimated it would be about 75 percent. He
reiterated that the employee is never at risk "from his or her
contributions if [he/she separates] after a year or two years of
service."
9:00:46 AM
SENATOR STEDMAN, in response to another question from
Representative Gatto, confirmed that under the defined
contribution plan, the heirs of a deceased plan member have a
connection to the plan.
REPRESENTATIVE GATTO said it's a great opportunity to be able to
leave benefits to one's heirs.
9:01:02 AM
REPRESENTATIVE RAMRAS asked if a "new member to PERS" would be
able to choose to switch from a defined benefit to defined
contribution plan. Second, regarding investing, he asked how
much harm a person can do to his/her [retirement].
9:01:42 AM
SENATOR STEDMAN said the answer to the first question is yes,
but there are restrictions regarding the time frame. He said he
doesn't think it would be beneficial for employees presently on
Tier I and II to switch, particularly those on Tier I.
Regarding the second question, he said there would be portfolios
like in a money market account, which is risk free. The board
could also offer a fixed rate, bond fund, a balanced fund, and
perhaps something more aggressive like the [Standard & Poor's
(S&P)] 500 index. Employees could pick their assets depending
on their risk comfort level. He offered further details.
SENATOR STEDMAN said when people who testified "on the other
side" were asked if they like their SBS accounts, they said yes.
He added, "Well, this virtually is very similar to that."
9:06:04 AM
REPRESENTATIVE RAMRAS said one of the issues that he has been
presented with is the anxiety component. He said there is an
irrational fear held by current retirees. He mentioned the
issue of attraction and retention. He asked what SB 141 would
do as a vehicle to address the concerns of people. He said he
is was "beat on over the weekend" by concerned people with
irrational fears; the message they gave him was to "go slow" and
"be pensive."
9:07:35 AM
SENATOR STEDMAN responded that a lot of the concern is from
misinformation. The state of Alaska is not going to relinquish
its obligation to take care of the retired people who have
worked in the system for many years. He said it is not their
fault that there has been a "mismatch in assets and
liabilities." Regarding current employees, he mentioned cost
controls. He admitted that the 50-basis-point increase to
employees is an issue, because it's a real cost increase to the
employees. He stated his belief that a one-half of 1 percent
change a year is something the employees can handle. He said it
would be foolish not to recognize the effects of collective
bargaining.
SENATOR STEDMAN said the effort is being made to create a
healthy system, and the current system is only being tweaked a
little bit. The major change would affect future employees that
would start on or after July [2005]. He emphasized that there
has been no discussion toward abolishing Tiers I, II, or III.
Regarding addressing the concerns of constituents, he said he
would stand up and explain the reason behind the proposed
changes - changes that are being made in "a slow and methodical
way." He said people want this problem fixed.
SENATOR STEDMAN indicated that if the state steps up to the
plate, the cost of carrying the contribution increase is about
$350 million. He said it gets worse when considering the
general fund. He explained that half of the general fund is out
of [the legislature's] control - it's formula driven. The other
half - a little over $2 billion - is "relatively within our
control." He said, "That $350 million is going to come out of
that one half of the budget." He said that's a huge impact. He
noted that "some of us" would like to "solve this problem sooner
than later," because the financial redirection of capital is
huge and "it's starting this year."
9:12:03 AM
REPRESENTATIVE GRUENBERG asked what kind of disability coverage
would exist under SB 141.
9:12:33 AM
SENATOR STEDMAN replied that a discussion was held regarding
disability insurance, and it was decided not to add it. If
individuals want that insurance, it would be up to them to
purchase it.
9:12:53 AM
CHAIR SEATON clarified that active employees are covered for
disability under active employment.
9:13:06 AM
SENATOR STEDMAN said, "There's a workers' [compensation] issue,
but ... the structure's different from under [today's] tier
plan." He deferred further comment to Melanie Millhorn.
9:13:54 AM
MELANIE MILLHORN, Director, Health Benefits Section, Division of
Retirement & Benefits, Department of Administration, in response
to Representative Gruenberg's previous question, explained that
active employees who are injured on the job are covered by
workers' compensation. They also have the option of paying a
premium to obtain additional disability benefits. In response
to a follow-up question from Representative Gruenberg, she said
that would not be affected by the proposed legislation.
9:16:10 AM
REPRESENTATIVE GRUENBERG asked about long-term care.
9:16:18 AM
MS. MILLHORN responded that long-term care is available as an
elective coverage. She stated that there is a high percentage
of employees that elects to have long-term care. She said
that's a premium paid for by the member and would not be
affected by the legislation.
REPRESENTATIVE GRUENBERG asked, "So, that wouldn't be affected
by either bill?"
MS. MILLHORN answered that's correct.
REPRESENTATIVE GRUENBERG asked what happens when a person with a
defined contribution plan outlives his/her retirement plan,
particularly for those without social security.
9:16:44 AM
SENATOR STEDMAN responded that it's theoretically possible, but
unlikely. He surmised that it could be possible if the person
didn't work long enough with the state to accumulate assets in a
retirement plan, or if there may have been economic events that
were detrimental to the person's long-term financial well being.
He said the state offers SBS - a replacement for social
security. He also mentioned deferred compensation and the
retirement system. He stated, "There is no guarantee, under
this plan, for a life income, unless - at the time of retirement
- ... they decided as an option under a defined contribution
plan to do an annuity, which you can do."
9:18:54 AM
REPRESENTATIVE ELKINS asked if the chair of the board would be
selected by the governor or by the board itself.
9:19:13 AM
SENATOR STEDMAN stated his assumption that the board would
select, because it is not specified in the bill.
9:19:31 AM
REPRESENTATIVE ELKINS stated that he has a problem with having
the governor pick the chair, because "they tend to end up being
dictators ...."
9:19:39 AM
SENATOR STEDMAN directed attention to page 47, line 22, which
shows that the board would select its chair.
9:20:16 AM
REPRESENTATIVE GRUENBERG asked how retirees are faring under
defined contribution plans in the private sector.
9:20:36 AM
SENATOR STEDMAN stated that the private sector has moved away
from defined benefit plans [because those plans] bankrupted
numerous corporations. Those corporations that have not are
paring back benefit levels in an effort to manage the system.
Unlike the public sector, he explained, the private sector can
go bankrupt and restructure. He said the State of Alaska
doesn't have that option.
9:21:31 AM
REPRESENTATIVE GRUENBERG asked if there are any changes in that
practice under the new bankruptcy law.
9:21:46 AM
SENATOR STEDMAN said he doesn't know.
9:21:55 AM
MS. MILLHORN also said she doesn't know that answer.
9:22:18 AM
SENATOR STEDMAN offered further examples of the differences
between the private and public sectors.
9:22:54 AM
REPRESENTATIVE GRUENBERG asked what the startup costs would be
for SB 141 and how they would be covered.
9:23:13 AM
SENATOR STEDMAN said the costs would be covered in a fiscal
note.
9:23:34 AM
CHAIR SEATON noted that there are fiscal notes in the committee
packet.
9:23:58 AM
REPRESENTATIVE GRUENBERG asked if other, less drastic,
alternatives had been considered as a way to protect workers'
retirement security and to reduce costs, and, if so, what were
the pros and cons of those alternatives.
9:24:13 AM
SENATOR STEDMAN prefaced his answer by saying that he would
categorize this plan as neither drastic nor fast moving. He
reminded Representative Gruenberg that there were two
alternatives that were produced by the PERS and TRS Boards. One
was the hybrid defined contribution/defined benefit plan, and
the other was solely a defined contribution plan. He warned,
"You can always, in the future, add a defined benefit portion to
your retirement plan, but once it's in, you can never get it
out." He said he thinks the State of Alaska, as employer,
should maintain as much flexibility as possible in its system to
be able to respond to changing market conditions.
9:25:15 AM
REPRESENTATIVE GRUENBERG returned to the issue of when a retiree
dies. He mentioned that, due to the repeal of the death tax,
people are concerned about estate planning. He offered his
understanding that Senator Stedman had said that if a person
dies before accessing all of his/her benefits in a defined
contribution plan, those assets would become part of the
person's estate.
9:26:02 AM
SENATOR STEDMAN responded that that could be the case, depending
on "how it's structured." In response to a follow-up question
from Representative Gruenberg, he explained that annuities would
generally expire upon a person's death, unless "you pick ...
your spouse and yourself." He indicated that people will "roll
it" into their IRA, which opens up the possibility of moving the
money from generation to generation. He mentioned beneficiaries
and money passing from a spouse to children. In response to a
question from Representative Gruenberg, he confirmed that a
person could decide to give the money to his/her children
directly. He explained that a person can have a list of
beneficiaries. He said the employer rarely gets restrictive on
these types of issues, because the employer wants the employee
to have a happy retirement. In response to a follow-up question
from Representative Gruenberg, he confirmed that there are no
restrictions in the bill. He offered his understanding that the
new board would set up the investments, the retirement
mechanisms, and some of the selections. He said he's sure the
board could attach restrictions, but most likely the focus would
be on what can be done, not what can't.
9:29:49 AM
CHAIR SEATON clarified that upon retirement there's a list of
selections that a person can make regarding investments; it is
the person's account to do [with as he/she wishes]. For the
benefit of the public, he clarified that the board cannot take
the account away or restrict access to it.
9:30:07 AM
REPRESENTATIVE GRUENBERG clarified that his question is related
to restriction on transferability at death.
9:30:32 AM
SENATOR STEDMAN opined, "You don't want to put this type of
structure in statute. You want it in regulation; you want the
board to create it. And then you want the board to bump up
against federal guidelines." He indicated that emphasis would
be to have as many options and as much flexibility to employees
as possible.
9:32:11 AM
CHAIR SEATON moved Amendment 1, which read as follows:
Page 15, line 18:
Delete "eight"
Insert "11"
Page 16, line 8:
Delete "4.5"
Insert "5.25"
Page 81, line 17:
Delete "eight"
Insert "ten"
CHAIR SEATON explained that Amendment 1 would change the
contribution rate in PERS and TRS.
9:32:39 AM
REPRESENTATIVE RAMRAS objected to Amendment 1. He said he
thinks savings rates are difficult for most Americans to
achieve, because "we're extraordinarily concerned about
consumption." He stated that although a better savings rate is
better for people, it's not the responsibility of the
legislature to "do this."
9:33:24 AM
CHAIR SEATON referred to an eight-page handout in the committee
packet showing a comparison of contribution rates and projected
benefits for HB 238 and SB 141. He said there are two scenarios
for each. Page 1 and page [7] compare [TRS projected benefits
for the two bills]. He also noted that page 1 of the handout
correlates with the proposed changes in Amendment 1. He said
the projected benefits would accumulate faster with Amendment 1,
and he offered an example. He also noted that the employer
contribution rates included in Amendment 1 are basically the
employer contribution rates for the normal costs, as they are
now. He noted that, in the past 20 years, the average
contribution rate for the employer has been 11.16 [under TRS]
and 10.68 under PERS.
9:37:20 AM
SENATOR STEDMAN noted that the tier review committee recommended
the 11.5 percent, and the Senate Finance Committee changed that
number to 12.5 [percent]. He stated that if the House State
Affairs Standing Committee is comfortable changing that to 15.25
percent, that would definitely create a larger pool of assets
available for retirement for the employees.
9:38:17 AM
CHAIR SEATON asked if the average normal cost rate for employers
in the past has been about 11 percent.
9:38:33 AM
SENATOR STEDMAN responded, "There abouts." He said, "This is a
whole different mechanism than the defined benefit." Generally
speaking, he noted, when trying to save for retirement, "10
percent is kind of a base number to start with."
9:39:25 AM
REPRESENTATIVE GATTO asked if an employee can "elect a lower
number."
9:39:42 AM
SENATOR STEDMAN answered that the number is fixed; it is set in
statute. However, he said the employee does have the ability
through deferred compensation to contribute more.
9:42:12 AM
A roll call vote was taken. Representatives Gruenberg and
Seaton voted in favor of Amendment 1. Representatives Elkins,
Lynn, Ramras, and Gatto voted against it. Therefore, Amendment
1 failed by a vote of 2-4.
9:42:26 AM
CHAIR SEATON moved Amendment 2, which read as follows:
Page 18, line 12:
Delete "five"
Insert "three"
Page 18, lines 15 - 17:
Delete all material and insert:
"(1) 50 percent with one year of service;
and
(2) 75 percent with two years of service."
9:42:31 AM
REPRESENTATIVE RAMRAS objected to Amendment 2.
9:42:40 AM
CHAIR SEATON addressed Amendment 2. Through the proposed bill,
members would be vested fully in the defined contribution
account after 5 years on a gradated scale, incrementing 25
percent each year with 0 percent for the first year. He said
Amendment 2 would change that so that a member is vested after
three years, with the member vesting in 50 percent of the
employer contribution after one year of full service, and 75
percent after two years. He said the plan outlined in Amendment
2 is similar to what the State of Colorado adopted. He said the
purpose for changing to a defined contribution plan is to have a
means by which to attract employees. A number of employees come
to the state thinking that they will be here a very short time.
Having a portable plan that takes longer to vest in would lower
the ability to attract people to the plan.
9:43:53 AM
REPRESENTATIVE RAMRAS explained his opposition to Amendment 2.
He said the amendment favors short-term employees and he likes
"people that make a longer term commitment to the state." He
revealed that he employs 300 people and one of his greatest
expenses is training employees.
9:44:33 AM
SENATOR STEDMAN stated that the reason for deciding on the 5-
year vesting schedule was due to a request by NEA-Alaska because
of its concern for teacher retention. Notwithstanding that, he
said he is open to the wishes of the House State Affairs
Standing Committee.
9:45:36 AM
CHAIR SEATON said the two purposes of "the benefit package" are
to attract and retain. He added, "And the purpose of this
earlier vesting schedule is so that we have a more attractive
package for attracting people initially to come into this
system, as well as giving some incentive for remaining longer in
service."
9:46:03 AM
A roll call vote was taken. Representatives Gruenberg and
Seaton voted in favor of Amendment 2. Representatives Lynn,
Ramras, Gatto, and Elkins voted against it. Therefore,
Amendment failed by a vote of 2-4.
9:47:16 AM
CHAIR SEATON directed attention to Amendment 3, which read as
follows:
Page 18, line 18, through page 19, line 11:
Delete all material.
Page 48, lines 10 - 17:
Delete all material and insert:
"(A) AS 39.30.150 - 39.30.180 (State of
Alaska Supplementary Annuity Plan); and
(B) AS 39.45.010 - 39.45.060 (public
employees' deferred compensation program);"
Page 84, line 16, through page 85, line 9:
Delete all material.
CHAIR SEATON stated the following:
One of the big perceived problems with a defined
contribution ... program is that ... people tend to
invest too conservatively and not build up their
accounts over time. However, this option would not
give employees enough options. And so, I'm not going
to offer this amendment. What we will do is ...
request ... a new investment option that would mirror
[the Alaska Retirement Management board's (ARM)]
investment strategy, so that they could get the same
return rate ... like ASPIB has right now.
9:47:52 AM
CHAIR SEATON moved to adopt [Conceptual] Amendment 4, as follows
[original punctuation provided]:
To become eligible for medical coverage under SB 141
you must be Medicare eligible with at least 10 years
of service, or of any age with 25 years of service for
police/fire and 30 for all others. If you terminate
employment before Medicare eligible age but have
fulfilled the minimum service requirement, you will
receive access-only to the medical plan but will be
required to pay the full premium. At Medicare
eligible age the member receives a percentage subsidy
of the premium based on the years of service ranging
from 70% for 10 years of service to 90% for 30+ years
of service. Retirees and their dependents are
eligible, however, a different premium will be
established for a single member from that of a member
with dependents.
Amendment number 4 substitutes the language from HB
238 regarding the medical plan discussed extensively
in committee, which provides medical coverage for
members 60 months pre-Medicare eligible age.
Delete p. 26 line 3 to page 28 line 1, and p. 28
lines 12-19, Insert medical language provided and
amended as necessary for drafting purposes.
Corresponding medical language for PERS is found
on p. 92 line 20 through p. 93 line 27.
Minor changes will have to be made throughout the
bill to make SB 141 congruent with the inserted
language from HB 238.
9:48:25 AM
CHAIR SEATON indicated that [Conceptual] Amendment 4 would
provide medical coverage for members ["60 months pre-Medicare
eligible age"]. He asked if there was any objection to
[Conceptual] Amendment 4. There being none, [Conceptual]
Amendment 4 was adopted.
9:48:40 AM
CHAIR SEATON moved Amendment 5, which read as follows:
Page 46, line 30, following "system":
Insert "selected from a list of three to five
persons nominated by the members of the system"
Page 46, line 31, following "system":
Insert "selected from a list of three to five
persons nominated by the members of the system"
Page 47, line 2:
Following "terms of":
Delete "three"
Insert "six"
Following "total of":
Delete "three"
Insert "two"
Page 47, line 3, following "served":
Delete "three"
Insert "two"
Page 105, line 26, following "AS 39.05.055(7).":
Insert "Notwithstanding AS 39.05.055(7), the
terms of the two finance officers appointed under
AS 37.10.210(b)(2) and (3), as repealed and reenacted
by sec. 59 of this Act, shall be set so that the term
of one of the finance officers expires three years
apart from the term of the other finance officer, and
the terms of the two members of the retirement systems
appointed under AS 37.10.210(b)(4) and (5), as
repealed and reenacted by sec. 59 of this Act, shall
be set so that the term of one of the members expires
three years apart from the term of the other member."
9:48:48 AM
REPRESENTATIVE RAMRAS objected [to Amendment 5].
9:49:18 AM
CHAIR SEATON addressed Amendment 5. He explained that SB 141
would require a board of nine members, two of which must be
active or retired PERS or TRS employees, and all of which would
be appointed by the governor. Amendment 5 would effect changes
regarding the Alaska Retirement Management Board, including a
requirement that the nominees for PERS and TRS representatives
be chosen from candidates put forth by the appropriate
bargaining units. He said it would generate more continuity
over time by ensuring that the process is not "a political
appointee kind of situation."
9:50:05 AM
REPRESENTATIVE RAMRAS stated that he likes SB 141 as it is and
the formulation of the board as the bill outlines it. He said,
"I'm more interested in managing this like it's a business."
9:50:52 AM
CHAIR SEATON clarified that Amendment 5 would not change any of
the membership of the board; it simply would lengthen the term
of service and would allow a system for nomination of the
members.
9:51:22 AM
A roll call vote was taken. Representatives Gruenberg, Gatto,
Lynn, and Seaton voted in favor of Amendment 5. Representatives
Ramras and Elkins voted against it. Therefore, Amendment 5
passed by a vote of 4-2.
9:52:33 AM
REPRESENTATIVE LYNN moved to adopt [Conceptual] Amendment 6,
which read as follows [original punctuation provided]:
Conceptual Amendments to Section 37.10.210
Page 46 Line 21: Include one trustee from
general public
Line 29: Include two trustees from PERS
Line 31: Include two trustees from TRS
REPRESENTATIVE RAMRAS objected to [Conceptual] Amendment 6.
REPRESENTATIVE LYNN said the [board membership] structure needs
to be balanced, because it's too top-heavy with the
administration. He opined that the PERS and TRS members need to
have more control over what happens to their own money.
9:54:07 AM
REPRESENTATIVE RAMRAS said he likes the fact that "the
governor's held accountable to manage this." He added, "If the
permanent fund would have been as mismanaged as PERS and TRS is,
heads would have rolled."
9:55:01 AM
REPRESENTATIVE LYNN said he doesn't know that the current PERS
and TRS members have mismanaged the investments. He stated,
"Whatever they've got, the legislature put it together - not the
PERS and TRS Board." He said the board was stuck with what it
was given and worked well with it, and he stated his hope that
it would continue to do so with whatever new structure the
legislature puts together.
9:55:41 AM
CHAIR SEATON stated his opposition to Amendment 6. He indicated
that there was or would be many members of PERS on the board,
including the commissioner of the Department of Administration.
9:56:15 AM
REPRESENTATIVE LYNN noted that the commissioner reports to the
governor.
CHAIR SEATON said he understands that.
9:56:22 AM
REPRESENTATIVE GRUENBERG stated that was his concern. He
illustrated that it could be said that anybody representing
management is technically a member of the retirement system;
however, their loyalty is to management, not to labor. He said
that's a real conflict and may be "one of the most important
flash points in the bill."
9:57:04 AM
CHAIR SEATON said, "We do have a totally changed board that has
a fiduciary responsibility; it's going to be managing assets and
... liabilities. The decisions on benefits will have to come
back through the legislature."
9:57:11 AM
REPRESENTATIVE GRUENBERG said the question is not a technical
one regarding a fiduciary responsibility, because the current
board has the same fiduciary responsibility. He said the
question is who decides who's on the board. He stated the
following:
These funds are funds that belong to the employees.
The employer loses the funds when the funds are
contributed. They are held in trust for the
employees, and to give the employees no more than a
pittance in the makeup of the board really doesn't
give the employees the respect they need - the respect
they deserve. This is their money - at least give
them a couple extra people on the board ....
9:58:13 AM
A roll call vote was taken. Representatives Gruenberg, Gatto,
and Lynn voted in favor of [Conceptual] Amendment 6.
Representatives Elkins, Ramras, and Seaton voted against it.
Therefore, [Conceptual] Amendment 6 failed by a vote of 3-3.
9:58:54 AM
REPRESENTATIVE GRUENBERG indicated that he would like to revisit
Conceptual Amendment 6 later in the meeting when the full
committee was present.
9:59:07 AM
9:59:31 AM
REPRESENTATIVE GRUENBERG [asked that the committee again vote on
whether to adopt Conceptual Amendment 6].
9:59:39 AM
A roll call vote was taken. Representatives Gruenberg, Gatto,
Lynn, and Seaton voted in favor of Conceptual Amendment 6.
Representatives Elkins and Ramras voted against it. Therefore,
Conceptual Amendment 6 passed by a vote of 4-2.
10:00:45 AM
CHAIR SEATON [moved] to adopt [Conceptual] Amendment 7, which
read as follows [original punctuation provided]:
p. 58 line 16. Delete "AS 14.25.470" insert "(b) of
this section". Delete p. 58 line 16 starting at "or"
through line 21 ending at "adjustment". Insert "If a
person resumes employment the balance of their account
is restored plus any accumulated interest."
Insert line 22, (b) A member has access to their
Health Reimbursement Arrangement after 10 years of
service, whether or not they retire directly from the
system. However, the member is not allowed to draw
from that account until they reach the age 60 months
pre-Medicare eligible, or any age with 30 years of
service as defined in AS 14.25.470.
*Note: all changes in the TRS section should be
reflected in the subsequent PERS section.
CHAIR SEATON asked if there was any objection to [Conceptual]
Amendment 7. There being no objection, [Conceptual] Amendment 7
was adopted.
10:02:15 AM
CHAIR SEATON directed attention to a page labeled, "Changes to
CSSB 141 to be incorporated in a House State Affairs CS." [That
page shows Amendments 8-13, although some of the amendment
numbers were later changed.]
CHAIR SEATON [moved to adopt Amendment 8], which read as follows
[original punctuation provided]:
p. 3 line 12. Insert "(e) A report of the valuation
of the plan's projected liabilities."
CHAIR SEATON explained that Amendment 8 would require the Alaska
Retirement Board to evaluate the plan's projected liabilities
annually. He asked if there was any objection to Amendment 8.
There being none, Amendment 8 was adopted.
10:04:19 AM
CHAIR SEATON [moved to adopt] Amendment 9, which read as follows
[original punctuation provided]:
p.8 line 10. Delete "less than" and insert "the lesser
of"
line 11 after "active members" insert "11 percent for
TRS employer [sic] and 10 percent for PERS employers"
CHAIR SEATON explained that Amendment 9 would establish a floor
for employer contributions at 11 percent for TRS and 10 percent
for PERS. He stated the purpose of the amendment is to avoid a
situation under the current retirement plan where a rate is
adopted and "we dig ourselves into the hole."
10:05:31 AM
REPRESENTATIVE RAMRAS objected to Amendment 9.
10:05:39 AM
SENATOR STEDMAN said he thinks the issue has been addressed, but
in a different way - by saying that the amount cannot be lowered
below the normal cost. He posited that Amendment 9 might "make
it a little bit more restrictive on the ability to manage the
plan."
10:06:06 AM
CHAIR SEATON stated that is the purpose; the intent is to
prevent the board from adopting the rate and subsequently having
a swing that makes the adopted rate be too low. He reiterated
that this would be for the current plan.
10:07:24 AM
CHAIR SEATON announced that Amendment 9, with its objection,
would be held to address later.
10:07:39 AM
CHAIR SEATON [moved to adopt] Amendment 10, which read as
follows [original punctuation provided]:
p. 15. line 13. After "contribution retirement plan."
Add "A teacher becomes a member on their first date of
employment."
CHAIR SEATON explained that Amendment 10 would clarify that
membership to the system commences for teachers on their first
day of employment.
10:08:19 AM
SENATOR STEDMAN said he has no objection to Amendment 10.
10:08:26 AM
CHAIR SEATON asked if there was any objection to Amendment 10.
There being none, Amendment 10 was adopted.
10:08:38 AM
CHAIR SEATON moved to adopt Amendment 11, which read as follows
[original punctuation provided]:
p. 32 line 10, insert "'member contribution account'
means the member's contributions to their [sic]
defined contribution account plus any accumulated
interest."
10:08:54 AM
SENATOR STEDMAN said he has no objection to Amendment 11 at this
time.
10:09:06 AM
REPRESENTATIVE GRUENBERG stated his assumption that the
contribution, if it's in stocks, would include any appreciation
of depreciation.
CHAIR SEATON said, "Yes, it means ... 'plus accumulated
interest' would fall under this."
10:09:22 AM
REPRESENTATIVE GATTO asked, "Would you rather say 'gain'?"
10:09:32 AM
CHAIR SEATON announced that Amendment 11 would be held until
later.
10:09:41 AM
CHAIR SEATON [moved to adopt] Amendment 12, which read as
follows [original punctuation provided]:
p.35 line 31. Delete "65 years of age" and insert "60
months pre-Medicare eligible age"
p.54 line 26. Delete "age 65" and insert "60 months
pre-Medicare eligible age"
p. 101 line 28. Delete "65 years of age" insert "60
months pre-Medicare eligible age"
CHAIR SEATON explained that Amendment 12 would make revisions to
accommodate overall changes to the medical portion of the bill.
10:10:00 AM
SENATOR STEDMAN stated his need to leave to attend the Senate
Finance Committee meeting. He said it would be nice if a
decision could be made tonight regarding the bill.
10:10:56 AM
CHAIR SEATON asked if there was any objection to Amendment 12.
There being none, Amendment 12 was adopted.
10:11:27 AM
CHAIR SEATON [moved to adopt] Amendment 13, which read as
follows [original punctuation provided]:
p.14 line. 19. Insert "(D) a full-time or part-time
instructor of the Department of Labor and Workforce
Development who is a non certificated employee who
enters employment covered under AS 25.009 may elect to
retain coverage under AS 29.009."
CHAIR SEATON clarified that Amendment 13 would allow instructors
from the Department of Labor & Workforce Development to choose
between PERS and TRS.
10:11:57 AM
REPRESENTATIVE GRUENBERG asked Ms. Millhorn [who was standing at
the back of the room off microphone] if there is anybody else
who would fall into this category who should be included in the
amendment. He indicated that Ms. Millhorn shook her head no.
He said, "I remove my objection."
10:12:29 AM
CHAIR SEATON announced that, [hearing] no further objections,
Amendment 13 was adopted.
10:12:39 AM
REPRESENTATIVE GRUENBERG [moved to adopt] Amendment 14, labeled
24-LS0637\L.9, Craver, 4/18/05, which read as follows:
Page 13, following line 11:
Insert a new bill section to read:
"* Sec. 26. AS 14.25.210(a) is amended to read:
(a) A person who knowingly makes a false
statement, or falsifies or permits to be falsified any
record of this plan [SYSTEM], in an attempt to defraud
this plan [SYSTEM], is guilty of a class A misdemeanor
[AND FORFEITS ALL RIGHTS UNDER THIS CHAPTER]."
Renumber the following bill sections accordingly.
Page 29, line 30, following "Fraud.":
Insert "(a)"
Page 30, following line 1:
Insert a new subsection to read:
"(b) In this section, "knowingly" has the
meaning given in AS 11.81.900(a)."
Page 95, line 29, following "Fraud.":
Insert "(a)"
Page 95, following line 31:
Insert a new subsection to read:
"(b) In this section, "knowingly" has the
meaning given in AS 11.81.900(a)."
Page 105, line 25:
Delete "sec. 59"
Insert "sec. 60"
Page 108, line 25:
Delete "14.25.210"
Page 109, line 19:
Delete "SECTIONS 139 AND 140"
Insert "SECTIONS 140 AND 141"
Page 109, line 20:
Delete "secs. 139 and 140"
Insert "secs. 140 and 141"
Page 109, lines 21 - 22:
Delete "secs. 139 and 140"
Insert "secs. 140 and 141"
Page 109, line 23:
Delete "89 - 94, 107, 114, and 131"
Insert "90 - 95, 108, 115, and 132"
Page 109, line 25:
Delete "Section 141"
Insert "Section 142"
Page 109, line 26:
Delete "secs. 142 and 143"
Insert "secs. 143 and 144"
10:13:06 AM
CHAIR SEATON objected for discussion purposes.
10:13:12 AM
REPRESENTATIVE GRUENBERG stated that there are two provisions -
one in Title 14 and one in Title 39 - regarding a person who
knowingly makes a false statement. He said he considered
current language. He said, "We have made them congruent so that
anybody who makes a false statement is guilty of a Class [A]
misdemeanor, but they ... no longer will 'forfeit all rights
under this chapter'." He noted that the definition of
"knowingly" is in criminal code. He said Amendment 14 is
basically a technical amendment, except that "it says you don't
forfeit all your rights."
CHAIR SEATON removed his objection to Amendment 14. He asked if
there was any further objection. There being none, Amendment 14
was adopted.
10:14:42 AM
CHAIR SEATON stated:
By the way, the amendments that we adopted earlier
were the conceptual amendments, and now we have ...
those amendments by [Legislative Legal and Research
Services] - the actual language. And so, what I'd ask
is [that] the committee ... accept the [Legislative
Legal and Research Services] terminology for the ones
we adopted ....
CHAIR SEATON asked, "Is there any objection to that?" [None was
stated.] He announced that there would be further amendments to
be discussed when the committee reconvenes later tonight. In
response to a request from Representative Gruenberg, he said the
committee would have a committee substitute before them tonight
[incorporating the amendments adopted thus far].
The meeting was recessed at 10:16:05 AM to a call of the chair
at 6:00 p.m.
CHAIR SEATON called the meeting back to order at 6:12:22 PM.
Present at the call back to order was Representative Seaton.
Representatives Gatto, Elkins, Lynn, Ramras, Gardner, and
Gruenberg arrived as the reconvened portion of this meeting was
in progress.
6:12:56 PM
GINGER EVENS testified on behalf of herself in opposition to SB
141. She told the committee that she is a teacher in
Petersburg, Alaska. She stated that the defined contribution
retirement plan, as outlined in [SB 141] is not good for PERS
and TRS [members]. She said the current defined benefit
retirement system "provides retirement security for all." Ms.
Evens indicated that [the plan under SB 141] would not attract
new teachers to the state and Alaska's school districts would
suffer. She opined that in order to attract and retain good
quality educators, the retirement system needs to stay the same.
Educators, she explained, tend to stay in the system for their
entire career; therefore, having a portable retirement is a moot
point. She noted that she has "sent in quite a few [public
opinion messages (POMs)] regarding this issue."
6:14:31 PM
DORIS TANNER, testifying on behalf of herself, told the
committee that she began working for the State of Alaska in 1982
and currently works with the Department of Corrections. She
said she is also an officer on the statewide supervisory unit's
executive board, under APEA AFT. She said she is testifying on
two issues: the cost of the legislation to individual employees
and the lack of research and planning required to fix "the PERS
problem." She mentioned a document that she sent that
demonstrates the impact of the proposed legislation on base-
level employees at a range 15 - a middle of the road range
beginning at $1,571 semi-monthly. She said a single parent with
one child cannot meet reasonable monthly expenses, even without
the proposed increase. She predicted that "the scenario's going
to deteriorate" in the coming years.
MS. TANNER noted that, in the last 20 years, state employees
have only seen increases in pay for 10 of those years. Last
year, she said, the legislature approved no increase for fiscal
year (FY) 04 and a small 1.5 percent increase in wages for
employees effective July 1, 2005. She indicated that there is
appreciation for the increase, even though it is not large.
However, under "some of the PERS legislation being proposed,"
the increase will be negated by an increase in the employee cost
of retirement. She added, "At a minimum, a .5 percent increase
a year will still disable income levels."
MS. TANNER opined that the options available have not been
exhausted, nor does anyone know the exact size of the problem.
She said she's seen a lot of different figures. She continued
as follows:
Similar to what is occurring in our current
procurement legislation, the legislature, in my
opinion, has failed to seek the advise of the people
most affected and the people closest to the issue.
You need to ask for suggestions and seek solutions
from within - [from] those that can best answer the
questions. Unfortunately, the legislation's just
moving too quickly for anyone to really take the time
to pull this information together. I believe there's
consensus that we have a significant problem with
PERS; I just believe that it deserves due input,
research, and analysis before a solution can be
proposed.
MS. TANNER urged the committee to postpone any decision
regarding the bill until such time as that research can be
effectively accomplished.
6:17:28 PM
CONTESSA GOSSETT testified on behalf of herself in opposition to
SB 141. She told the committee that she is an employee of the
State of Alaska, in the Division of Juvenile Justice, within the
Department of Health & Social Services. She stated concern that
the proposed legislation would freeze the retirement costs for
present employees and substitute an inferior investment-based
retirement plan for new employees. She offered her
understanding that supporters of the bill are willing to trade
away a generation of qualified and professional state employees
to avoid extending retirement system benefits, and that the bill
would actually transfer the risk of investments and decisions
from the employer to the employee.
MS. GOSSETT indicated that it makes sense for the employees to
have a say regarding the members on the board. Ms. Gossett also
expressed concern that state salaries have not been keeping up
with inflation, which will make it difficult to recruit new
employees. She noted that other states currently participating
in defined contribution plans - such as West Virginia and
Nebraska - are returning to defined benefit plans. She stated
another concern is that passage of SB 141 would mean replacing
the existing PERS, TRS, and ASPIB boards with a 9-member board
that would be appointed by the governor.
6:19:29 PM
CHAIR SEATON asked Ms. Gossett if she is opposed to the
administrative hearing procedures. He clarified that the state
has a series of administrative hearing officers - judges that
just hear appeals, and that's who would be hearing the appeals.
Currently, those appeals are mostly heard by the PERS and TRS
Boards.
6:20:18 PM
MS. GOSSETT responded that she is new to this topic; however,
she shared her feeling that as a state employee she would "want
to have more involvement."
6:20:38 PM
ANDREA ANDREWS testified on behalf of herself and "other state
employees" in opposition to SB 141. She told the committee that
she is a union steward and a state employee in the Department of
Health & Social Services. She said the first issue she has
regarding the bill is the cost increase to state employees, and
the second issue is that the bill would not make working for the
state attractive. Ms. Andrews indicated that, as a single
mother trying to make ends meet, it's difficult to support a
plan that would take more money out of her paycheck. She said
she would like to see further investigation done to seek other
alternatives. She applauded Senator Elton for his arguments
against the bill. She said that although Senator Stedman's
reasoning for supporting the bill exists, there are other
alternatives to consider.
CHAIR SEATON asked those testifying to refrain from discussing
what the intentions of legislators may be regarding the
legislation and to focus instead on the legislation itself.
6:22:49 PM
KEVIN BRENNAN, testifying on behalf of himself in opposition to
SB 141, revealed that he has been a public servant employed by
the Alaska Department of Fish & Game for over 20 years. He
stated that he has given many uncompensated hours and forgone
higher pay in the private sector because he believes in what the
state has stood for. In return, he receives a stable retirement
benefit. He emphasized how much it bothers him to see some of
the bills being put forth [regarding PERS and TRS] and "what
that will do to the quality of the people that we have in state
service." He predicted that it would become increasingly
difficult to hire anyone who has any interest in staying with
the state or providing good service. He said the bill would
punish workers who didn't cause the problems. He stated his
belief that the bill would not do anything to resolve the
unfunded problems of PERS and TRS. He indicated that state
salaries have not kept up with inflation and "this will only
make it more difficult for us to do the jobs that we need to
do."
6:25:09 PM
MR. BRENNAN, in response to a question from Representative
Gatto, said a study was done that shows that there is "a
potential for under funding at a future date." He said he would
like a study done to see if that's correct. He would also like
to see more options explored before a big step is made into
creating a new tier for the retirement systems.
6:25:47 PM
REPRESENTATIVE GATTO restated his question to ascertain whether
or not Mr. Brennan feels that the current system he enjoys now
is in jeopardy.
6:25:57 PM
MR. BRENNAN answered that he feels the system was underfunded,
but that that was "not a problem of the employees."
6:26:01 PM
PAT HOLMES told the committee that he has been an Alaskan most
of his life and worked 18 years in the private sector and 25
years with the state. He said he is retired and suggested it
could be said that he is speaking for all the retirees in his
area. He agreed with the former testifier, Mr. Brennan, that
there should be more information on the premises made regarding
the potential shortfall, before the legislature [performs]
"major surgery." He suggested that the legislature hold back on
the bill and get a second opinion. He expanded on his surgery
analogy.
MR. HOLMES said he thinks having a single board or relying on
administrative hearings is "not in the best interest." He
asked, "How can you have an administrative person that
understands what it is to be a teacher?" He stated his strong
objection to the concept of having a government-appointed board
doing the management and review, because he thinks, "a person
should have some choice as to who sits on their retirement
board."
MR. HOLMES revealed that one of his last projects with "the
department" was out in the Aleutians. He said, "Basically you
get what you pay for." He said that, since his retirement, he
has seen a salmon-related area management job that has remained
open for more than two years. He said when he started back in
1973, there would have been 30 people lined up to get that job.
He offered his understanding of a study done a few years ago
"for the department" which showed that people who left the
department and went to work for the federal government earned 15
percent more, while those who transferred to the private sector
earned 30 percent more. He recalled that when he was active in
union negotiations, several times the [pay] increase was stayed
in order to maintain benefits over the long run. He noted that,
in 1997, there were hearings to reduce benefits and wages for
state employees, and he invited the Senate committee reviewing
that issue to join him on his aerial salmon surveys in the
Aleutians. He said no one came.
MR. HOLMES observed that state employees, particularly the ones
in the ADF&G, "give their heart, their soul, their family for
what they contracted for." He complimented the committee for
working after hours on the issue, and he indicated that there
are "tough calls" to be made. He reiterated that he would like
the committee to put aside a decision until more information and
other options are found.
6:30:24 PM
CARLENE AUGE, testifying on behalf of herself, told the
committee that she is attending school part-time while she works
full-time for the State of Alaska Pioneer's Home at a Custodial
range 1 - an entry level. She said she can no longer recommend
working for state to her children, because "we're constantly
under attack from the administration." She said [SB 141] has
frightened many people, including her coworkers. She asked,
"Why are you hurting us? Why are you constantly trying to find
ways to eliminate us, and get rid of us, and cut our pay and
benefits? It's not right. One of these days you're going to
push people too far and then we're going to start voting against
you."
6:31:31 PM
CHAIR SEATON, for the purpose of clarification, stated that a
new tier would not affect anybody who is a current PERS or TRS
employee. He said the benefits of those current employees are
guaranteed constitutionally; they are secured, paid at the
scheduled rate, and will not be diminished. He added that he
doesn't mean that anyone who is currently employed in PERS or
TRS cannot oppose the bill; he just wants them to know they
"don't need to fear that their benefits are in any way being
changed."
6:32:23 PM
BONNIE SULLIVAN testified on behalf of herself. She stated that
the labor, trades, and crafts members currently in PERS are
"depending on the state's retirement to help them through their
golden years." She said the fault of the unfunded liability is
not the fault of current or future employees. She stated that
SB 141 does not address or resolve the unfunded liability of
PERS/TRS. She opined that all workers deserve to know how much
of a monthly income they will be getting when they retire, and
SB 141 would not guarantee that for new hires.
MS. SULLIVAN noted that there are states currently in defined
contribution plans that are returning back to defined benefit
plans. She said there is a reason they are doing that and she
doesn't understand why Alaska's legislators are not contacting
those states to find out why. She also questioned why the
legislators aren't waiting for the second analysis, which she
said she believes has been requested and is in progress, before
pushing forward a bill. She said the State of Alaska has been
committed to a sound retirement system since before statehood,
and as a voting member of District 10, she said she would like
to see that system stay in place for current and new employees.
6:34:01 PM
TIM VIAVANT, Employee, Alaska Department of Fish & Game,
testified in opposition to SB 141. He urged the legislature not
to act to modify PERS and create a new tier without further
research and more planning. He said, in relation to many other
states' pension systems, Alaska's PERS and TRS funding is
actually in better shape, and the shortfall in funding is more
related to the effect of future health care costs than it is to
pension payments. He continued as follows:
I'd also like to point out that one of the ... causes
of the anticipated shortfall in PERS is that retirees
in both systems receive automatic cost-of-living
adjustments that are based on the Anchorage CPI, while
existing wage earners have not received wage
adjustments that are equal to those of retirees. So,
obviously, the pool of people paying in -- rate of
increase is rising more slowly than those of retirees.
I'd like to state that, [regarding] changes in makeup
on the PERS and TRS Boards, I fail to understand how
preventing members from serving on the boards is
supposed to fix this problem. And I must state that I
feel that this aspect of this bill is politically
motivated and has very little to do with solving the
problem.
MR. VIAVANT said creating a new tier and increasing current
employees' contributions will hurt recruitment of new employees
and retention of current employees - particularly those who are
not vested in the system. He concluded, "All of those things
will contribute to hurting the existing workforce."
6:37:04 PM
SCOTT LEIGH testified on behalf of himself in opposition to SB
141. He noted that he has been a State of Alaska employee for
the past 11 years, and he is the northern region chair for the
APEA AFT Local 4900 supervisors. He said he understands that
there is a perceived and potential problem, but he also believes
that "this is a window of opportunity to work with the public
employees of this state to provide a win/win scenario." He said
that can only happen after all the facts - including second
opinions - are known. He said the current system has loopholes
that should be patched before adding additional funding "on the
backs of current and future public employees."
MR. LEIGH said that, as a professional engineer, State of Alaska
employee, and a hiring manager, he finds his job of recruiting,
hiring, training, and retaining qualified employees becoming
increasingly difficult. He said in the years of bounty the
state reduced contributions, to the detriment of public
employees. Now, after some lean years, the [public employees]
are being asked to bear additional burden "with additional
charges against our retirement system." Mr. Leigh stated his
belief that SB 141 begins to treat public servants as a
liability, rather than as the resource they are. He encouraged
looking into other options. He stated, "Public employees did
not cause this problem, but given the chance I believe that they
can be proactive in a solution that is in the best interest of
the State of Alaska."
6:39:13 PM
MARTIN BRANVILLE, testifying on behalf of himself, said he is a
state employee, a heavy equipment operator, and is close to
retirement. He said he is Tier I, so the proposed legislation
would not affect him; however, he stated his belief that it
would affect the quality of personnel that will be available to
recruit "from here on out." He revealed that his father retired
after 13 years "out of Local 302," and his retirement is more
than Mr. Branville's will be after 25 years. He also noted that
a friend of his working in the private sector, who will be
retiring at about the same time, will receive a retirement
pension of between $9,000 and $11,000 a month. He stated, "So,
I think for you to keep cutting the retirements of future
employees is only going to hurt the State of Alaska and cause a
lot of problems down the road that you're going to have to go
back and try and fix again. And you'll be in the same problem
you are in now, only you're going to be going the other way."
6:41:29 PM
JEFF JABUSCH, Finance Director, City of Wrangell, stated that
one concern is the rapid increase of the employers' share. He
said, "Next year, our share will be about $126,000. We also got
word that our group insurance is going up 22 percent, so for
another $153,000." He said Wrangell is attempting to rebound
its economy. He said, "Something like this - we applaud the
bill in general. I think we're on the right path to help save
some of these communities." Mr. Jabusch warned that if things
continue as they are without a funding mechanism to at least
bridge the next couple years, [the City of Wrangell] is looking
at the possibility of laying off close to 15 percent of its
general work force, including police, fire, library, and
schools. He said he doesn't know how Wrangell can survive
without some change, and he said he thinks the bill may need
some tweaking, but in general is on the right track towards
"balancing some of these budgets." He recommended, "Any help
the legislature could give communities to funding the PERS
shortfall here in the next couple of years ... would be greatly
appreciated." He mentioned Wrangell's timber industry-related
problems.
6:44:41 PM
BOB PLUNELLA, City Manager, City of Wrangell, said he hasn't had
time to study the entire bill, but indicated his concurrence
with the testimony of Mr. Jabusch.
6:45:28 PM
CHAIR SEATON noted that SB 141 would allow for $69.5 million,
which would basically be for PERS funding in the next few years.
6:45:44 PM
MR. PLUNELLA said that sounds good, and he told the committee to
keep up the good work.
CHAIR SEATON noted that many people think there has only been a
second opinion requested; however, Legislative Legal and
Research Services has requested a third opinion. He said
nothing will be passing the House today; the bill still has to
be heard by the House Finance Committee.
6:46:51 PM
LESLIE SIMMONS, testifying on behalf of herself and representing
the southcentral state supervisors [APEA AFT-SU], informed the
committee that she is an employee of the Department of
Environmental Conservation (DEC). She said she supports the
legislature's attempts to find solutions for the problems facing
the state government; however, she believes that the proposed
plan is no solution. She said SB 141 will create additional
problems and does not resolve the problems at hand. State
employees as a whole are a benefit to the state, she said, and
thus deserve to be regarded as such.
6:47:47 PM
PAT LUBY, Advocacy Director, AARP-Alaska, returned to a question
by Representative Gruenberg earlier in the morning regarding
whether someone could outlive a defined contribution pension
plan. He said the answer is yes. He noted that PERS and TRS
employees do not participate in social security, which is
basically a defined benefit plan. He confirmed that it's true
many companies in the private sector have switched from a
defined benefit to a defined contribution plan; however, the
private employees all participate in social security and retain
the defined benefit provision of social security. He stated
that a person cannot outlive social security, but he/she can
outlive a defined contribution plan. Should Alaska adopt a
defined contribution plan and drop the defined benefit plan for
new hires, it should seriously consider that some of the state's
future retired educators, municipal retirees, and state retirees
may very well outlive their defined contribution plan -
particularly those in the lower pay grades. He questioned how
the state would be able to deal with those people in the future
when they have no social security and have outlived the PERS or
TRS contributions. He said none of us knows how long we will
live, nor can we predict what inflation will be in the future
and the damage it may reek on a defined benefit contribution.
MR. LUBY emphasized that changing the retirement system is
serious business with serious consequences. He said AARP
recommends that the House State Affairs Standing Committee
consider delaying action on SB 141 and all related bills until
2006, and to hold hearings throughout the state during the
Interim, involving the various employers and potential employees
that may be impacted. He said AARP has a number of retired
educators in its membership who remain vitally concerned about
the quality of education throughout the state and worry about
Alaska not being attractive to young teachers who can go Outside
and find better benefit programs. He added, "Frankly, we have
the same concern about not being attractive to young police
officers and fire fighters - anyone who might wish to work in
municipal or state government." He said he knows Senator
Stedman has indicated that he has worked on the issue for over a
year; however, constituents and AARP members have many questions
related to a bill they only found out about when it was put
forward in the last few weeks.
6:50:47 PM
STACY OATES, testifying on behalf of herself, told the committee
that she is an accountant for the Division of Motor Vehicles, a
hiring official, and a vested PERS member. She said she has
three basic issues with the bill. First, as a hiring official
with the state, it's already a challenge to get good employees.
She remarked that what makes [the state] marketable is its
benefits, "since our spending power as state employees has
decreased so dramatically in the five years, or so." She
illustrated that five years ago she had 50 applicants for most
of her Accounting Clerk II positions; now she's luck to get 25.
Second, Ms. Oates stated her concern about changing the board.
She posited that any board should be approved by the affected
members; retirees and current employees should have a vote. She
specified that she does not feel that board members should be
appointed by one political person. Third, Ms. Oates said this
issue is too important to decide quickly; therefore, she urged
the legislature to slow down and obtain more information. She
stated that the system is not in immediate jeopardy and more
deliberation should be done.
6:52:26 PM
STEVE HOFFMAN, testifying on behalf of himself, told the
committee that he worked for the Alaska Department of Fish &
Game for 28 years, and for a majority of that time held a
supervisory position. He said in the last 5-10 years,
recruiting new employees has become increasingly difficult.
Potential employees are comparing the state's wages and benefits
to that of the federal government and private sector, and they
are "finding more lucrative opportunities in those arenas." He
stated that the development of a Tier IV plan would further
erode the ability to recruit long-term, devoted employees who
are interested in doing the best job for the State of Alaska.
6:53:40 PM
CHARLIE ARTEAGA, testifying on behalf of himself, revealed that
he is a 37-year resident of Alaska, a retired former educator,
and the most recently retired member of the TRS Board, which he
chaired for a number of years. He stated that SB 141, HB 238,
and the initial report brought out to the PERS and TRS Boards by
its internal committee are all similar. He said, "They are a
piece of a 'well bill,' if you will, that I do not care for."
Mr. Arteaga specified that he opposes the defined contribution
elements of all those reports and bills. He also stated
opposition to the minimal provisions of the medical portion of
the proposed benefits. He said:
We have been here before: Back in the late 70s/early
80s the funding ratio in TRS was something like 68-69
percent, and we got close to 100 percent by the year
2000. The same with PERS - they were actually over
100 percent back in the year 2000. The major problem
that we have encountered in the last five years, of
course, is the decrease in the market. And the second
item, of course, is a humungous increase in medical
insurance premiums. That's where the problem lies.
To diminish the benefits of future employees in Alaska
because of those two reasons, to me seems completely
and totally out of line. If you're going to do
something, it seems to me that you need to do it
right; I don't think you need to be blackmailed into
poor decisions. I think you need to take a look, over
a period of time, as to what is best for the future
employees of this state.
MR. ARTEAGA said he resents when it is stated that [a change to
employee benefits] does not affect him because he is retired.
He compared that to the President [of the United States] saying
if a person is over 55 a new social security would not affect
him/her. He stated that he has a son that is currently getting
ready to become a teacher, and he speculated that he might have
grandchildren who might want to come to Alaska to teach, and "it
will definitely affect them." He urged the committee to "take
your time, take a long look, and make the right decision." In
regard to hearing procedures, Mr. Arteaga said he thinks PERS
and TRS must have member representation, preferably elected
versus appointed. He said it's important that active and
recently retired members have a body that will hear them, will
know their concerns, and are familiar with the issues of their
employment.
6:56:59 PM
DUANE MORAN, President, Anchorage Council of Education, which is
affiliated with APEA AFT, testified on behalf of the council.
He said he has been in Alaska for 27 years, but only 7 years in
public service. Regarding the bill's potential impact to
current employees, he proffered, "I know for my bargaining
group, for the next fiscal year starting July 1 we have a 0
percent increase. Even [with] a .5 percent [increase] we would
be ... going further behind, let alone anti-inflationary
impact." Regarding the retention of qualified employees, he
said one of the things that has always struck him meeting people
who work in the public sector is that they tend to stay when
there is an incentive to stay, for example, when there is a
better retirement the longer an employee stays. He said there
is a cost associated with employee turnover, because of having
to train new employees. Changing to a defined contribution
plan, he predicted, would "make the portability for people to
leave that much easier." Mr. Moran stated that it's been
reported that there is a major problem, which he said he can't
dispute; however, he equated the situation with surgery. He
clarified that it is important to get as many opinions as
possible, in order to make the best decisions possible. He
emphasized the appropriateness of prudent steps during
deliberation.
CHAIR SEATON reiterated that the committee would be getting a
third opinion regarding the actuarials, and there would be an
additional opportunity [for the public to testify] before the
House Finance Committee, if SB 141 moves from the House State
Affairs Standing Committee.
6:59:47 PM
SANDRA BESSER, President, Fairbanks North Star Borough Employee
Association, Local 6125 APEA AFT, said she is an 18-year
employee of the borough speaking in opposition to SB 141. She
said the projected shortfalls have occurred for a number of
reasons, none of which are because of the employees. She
recommended a thorough review of all the options for addressing
the shortfalls, rather than "just jumping on one of the easiest,
which is passing it off to the employee." She said, "We're
having an increasingly difficult time recruiting qualified
employees right now; we have some positions that have been
vacant for extended periods of time." She said the effect of SB
141 would not only affect employees, but also consumers. She
said, "I want to look at the quality of my child's teacher and
know that they have someone that is qualified and is more than
just walking in and taking a paycheck because they don't make
enough to care." She said she feels the same about fire
fighters, policemen, and "all these people ... who are out here
giving our hearts to the state." Ms. Besser said there are a
lot of jokes circulating about government on the low bid. She
stated that she doesn't want to see the day when that's how
people look at public employees. She indicated that the reason
she is testifying is because, "as Alaskans, we too are looking
at the future of our state and those it ... employs ...." She
urged the committee not to pass SB 141.
CHAIR SEATON said the purpose of listening to all this testimony
is to hear "the full breadth of comments."
7:02:26 PM
BURNS COOPER, testifying on behalf of himself, stated that he
has been an employee of the University of Alaska Fairbanks for
15 years. He pointed out that any plan that raises
contributions is, in fact, a cut in benefits. A retirement plan
for PERS and TRS members is two-pronged, he said: the pension
plan provides some basic security, but it doesn't cover all of
an employee's retirement expenses. Employees are expected to
put away as much as possible into other savings plans, such as
[tax-sheltered annuities (TSAs)]. He said, "These plans have
already been hurt by other financial forces - rising health care
premiums are taking another bite out - so, our ability to save
and be ready for what's going to happen in retirement is already
compromised, and taking more out of our paychecks is just going
to make that worse."
MR. COOPER emphasized his agreement with former testifiers that
this crisis was not created by employees, but was created
primarily by bad management, persistent under funding,
management transferring costs from other areas into the pension
funds for things like early retirements, and a lot of other
factors. He stated that weakening the pension system is just
going to add to the already existing problem of recruitment and
retention. He revealed that he has been in on the hiring
processes for three different job positions this year and
several candidates were lost to other jobs offering higher
salary and benefits. He concluded that the worse the benefits
package gets, the harder it will be [to find and retain
employees]. In response to a question from Chair Seaton, he
said he is a participant of TRS.
7:05:15 PM
GERRY GUAY, Chair, Southcentral chapter, state supervisory,
[APEA AFT-SU], testified on SB 141. He said, "As a state
supervisor, I think we all recognize the value of good workers
to the mission of our respective departments. We believe the
proposed change in our retirement system would only serve to
jeopardize the quality of state workers in the future." Mr.
Guay said workers receive compensation for the work they do. He
said, "Our total compensation package is comprised of a base
pay, a medical coverage, and a retirement. And if we worked in
industry, there's probably bonuses and all kinds of other
stipends that state workers never get a chance to see." He said
while many state workers have forgone higher paychecks, which
would have enhanced their daily life, they "except the promise
of a fair retirement package that will sustain them through
their golden years." He stated that SB 141 would only
jeopardize that promised package and make the hiring of skilled
replacement workers much more difficult than it currently is.
MR. GUAY said he works in the Department of Environmental
Conservation as a hiring manager. He said he has difficulty
finding qualified workers who will continue to provide the level
of service state workers currently provide. He said he is
currently attempting to hire somebody. Federal workers in a
comparable position level would make slightly more than in the
level for the state; however, the federal worker gets a 25
percent nontaxable Cost of Living Allowance (COLA). He noted
that in [the private sector] that level job would provide two to
three times the amount of money that he can offer his
prospective employee. The private sector employee is offered a
401K plan, "but they get a lot of money up front." He
concluded, "So, I guess if you want to keep good workers in the
future, and you want to take away the good retirement system
that we have - which is a guaranteed retirement system - then
you're going to need to double our pay to give us the 401K
retirement."
7:08:13 PM
SANDRA BOATWRIGHT, testifying on behalf of herself in opposition
to SB 141, told the committee that she is a staff member at the
University of Alaska Fairbanks. She said she thinks the
legislature should not consider passing the bill without a lot
more study. She noted that her own health care costs increased
a great deal last year and will be raised again in July. She
added, "And now it sounds like my employee contributions are
going to go up, as well." She said when she took her job 12
years ago, she made her choice for PERS/TRS based upon the plans
that were offered and the contract that was shown to her. She
said she has invested her money based on that plan. She said,
"I think I've lived up to my part of the bargain. I'm a good
employee and I've given all my work to this job, and it's not
fair for you to change what I was promised." She also pointed
out, "This just seems to be part of a trend of pushing costs off
onto employees, and I think there are better ways to deal with
this." She stated that she thinks the proposed governor-
appointed board is a bad idea, because that would completely
divorce the stakeholders from the people who going to actually
be managing the money and the benefits.
7:09:46 PM
PAULETTE WILLE testified on behalf of herself in opposition to
SB 141. She noted that she is in agreement with many of the
comments made by previous speakers. She stated her belief that
SB 141 "sort of throws the baby out with the bath water." She
described the bill as "a Draconian measure" that won't deal with
the financial problems currently faced in PERS and TRS. [Those
problems], she indicated, seem to be the result of bad
investments that the entire country has suffered under for the
last few years, and also poor management decisions. She
indicated that she does not support having the board populated
by political appointees, because stakeholders in the system who
vote for representatives on the board have a real vested
interest in seeing that the board is managed properly.
MS. WILLE revealed that she has worked almost 30 years either
with the University of Alaska or, more recently, the State of
Alaska, and every pay period she made her contribution to PERS
and her employer made a contribution along with her. She noted
that over time, as she made contributions to the retirement
system and towards health insurance, she has had increasingly
less money to contribute to her personal savings accounts, which
include a tax sheltered annuity with the state and deferred
compensation with the university. She stated her point is
simply that she thinks plenty of state employees who are
contributing to the system face the same situation. She said,
unfortunately, there is a national and state effort to devalue
public employees of all kinds. She said she is not surprised by
that effort in the state, but she is disappointed by it. She
echoed the sentiments of [Mr. Arteaga] regarding being concerned
with more than just one generation. She added, "I'm concerned
about the health of the system as a whole and the services that
the State of Alaska provides to itself and to members of the
private sector." She said she thinks the move to defined
contribution retirement systems wouldn't just affect public
employees, but also would affect private employees. She said
she's heard the issue of hiring and retention for years. She
said if people don't think they can afford to retire in Alaska
because benefits will be reduced, "they'll go someplace else."
She recommended "going slowly on this and reviewing it
carefully" in order to benefit the entire state.
7:14:41 PM
VIOLA "VI" JERREL, Ph.D., testified in opposition to SB 141.
She said she thinks "the five-year eligibility should be deleted
for the ... council members, assembly members, and so forth."
She indicated her support of voting for board members, rather
than having them appointed. She said, "I read in there
somewhere a line about ... the state having ... control, or
having prescriptions ... purchased in the state, and so forth.
I absolutely object to that." She indicated wanting to keep
Aetna insurance.
DR. JERREL expressed appreciation that there are a number of
attorneys serving as legislators. She noted that last week
Representative Gruenberg was citing statutes related to the
legislation being discussed and she appreciated that, because
that allows people to tell what a certain statute is before
making decisions during committee meetings. She noted that last
week a speaker gave potential reasons and background as to why
there is a shortfall of money and made the point that it isn't
the fault of the employees. She stated she thinks it's
important to oppose SB 141 and find a better way, without using
a quick fix.
7:17:09 PM
TIM JESTER testified on behalf of himself in opposition to SB
141. He noted that he is a former elementary teacher, a parent,
and currently a professor at the University of Alaska Anchorage.
He stated concern that SB 141 would undermine the quality of
public education in the state, by making it much more difficult
to attract qualified individuals to teach. As a result, the
children of the state would not receive the kind of education
they deserve and [the state] is obligated to provide. He asked
the committee members that, if they believe that issues exist
related to the retirement system, they slow down the process and
thoroughly examine the problems in a systematic, formal process,
and then make a deliberate decision that will improve the
state's education system.
7:18:41 PM
LUKE HOPKINS, testifying as an [employee] of the State of
Alaska, after 30 years of service at the University of Alaska
Fairbanks, asked the committee to consider holding the bill [and
related bills] through the interim and establishing a review
committee that would move around the state and take testimony
from the public. He suggested the committee could [research]
other states' actions in changing back [from a defined
contribution plan] to a defined benefit plan, and make that
information available to the public. He also recommended
establishing an advisory board of citizens from around the state
that could review the actions of the current PERS and TRS
Boards. That advisory board could then advise the legislature.
He stated his personal view is that [this legislation] is moving
too fast.
MR. HOPKINS, speaking now as a member of the Fairbanks North
Star Borough assembly, stated the following:
I am concerned ... [about] the actions that are, in my
view, holding some of the funding that the governor
set aside in the passage of these bills, both for the
school district funding of PERS and TRS share - which
in Fairbanks is about $4 million, I believe, and for
the borough administration it would be about almost
$900,000. And soon we'll be ... back to the cycle of
issuing pink slips. And if something happens where
this money isn't (indisc. -- coughing) from the bill
for some other reason, ... we're going to have a ...
major effect on jobs, and therefore on families in
this community.
7:22:47 PM
MIKE DAVIDSON testified on behalf of the Alaska Professional
Fire Fighters Association in opposition to SB 141. He stated
his belief that the proposed legislation is an attempt to solve
a problem that has not been clearly defined, and he said it
would be imprudent to push such legislation through. He said
the proposal is a "radical reinvention of the state's retirement
system" and raises concerns about both recruitment and
retention. He reported that the Anchorage Fire Department has
had great difficulty attracting and retaining employees,
particularly paramedics. He said those employees consider their
retirement once they are employed and are open to outside
offers. He indicated that portability is one of the key
elements being discussed, but that trait is not desirable in his
line of work; once employers get employees, they want to keep
them. He mentioned the high cost of job training. Mr. Davidson
said he thinks the state should slow down the process to allow
for a "thorough vetting of the problems" and to define the exact
issues that led to the problems within PERS and TRS.
7:25:36 PM
BEN STEWART, testifying on behalf of himself, told the committee
that as a 36.5-year, Tier I state employee, at first he didn't
think the bill would affect him; however, he thought of his
children. He stated that the bill is moving too fast, and he
said he would like the legislature to back off, take a better
look at the issues, and listen to the constituents. He said the
retirement system was good when he started working in 1968.
Each tier that has been added has eroded the system a little bit
more. Now, recruitment of qualified employees is difficult.
When an employee is not up to the level he/she needs to be, then
more money must be spent towards training. He pointed to bad
management in municipalities, as well as both a lack of
foresight and procrastination. He stated that he would like to
see the PERS/TRS Boards remain unchanged. He offered his
understanding that, due to decisions made by the boards in
fiscal year 2004, there was a nearly 15 percent return on the
retirement investment.
7:28:35 PM
MIKE HARBAUGH, testifying on behalf of himself in opposition to
SB 141, revealed that he works in maintenance for the Department
of Corrections and is a Tier II employee. He said he is also
representing his wife, children, and grandchildren. Regarding
whether the legislation would affect him as a Tier II employee,
he answered yes. He explained that it would affect the
contribution rate and, thus, would affect an employee's take-
home pay in the future. Regarding the management board, he said
he could not have confidence in a board whose members he cannot
vote for. He said it may be true that the current board did not
do such a good job and there may be a reason for eventually
increasing the amount of the contribution by a small amount. He
said, "I'm willing to do that if the state's willing to do the
same. But to put it all on us isn't fair, and therefore I'm
against ... SB 141 and any other attempt right now to change the
current and future PERS/TRS retirement benefit." He stated his
belief that the legislature should do further research and
conduct large meetings with stakeholders to come up with a solid
way to fix the current problem without throwing the system away.
He continued as follows:
I don't believe you're getting pertinent and correct
information on a lot of the things that you're asking.
I heard this morning there was a Senator that was
testifying and the Director of [the Division of
Retirement & Benefits] was with him, and you asked
them if there was a current disability included in the
current Tier II system, and they said there wasn't,
but there is. I don't know if they didn't know that
or what the problem was, but that was an incorrect
answer; you're not getting all the right answers.
MR. HARBAUGH reported that plumbers are getting $5 an hour more
on the street than state plumbers are. He said he already has
difficulty hiring a plumber, and he indicated that it would be
more difficult to do so if the state benefits are cut further.
CHAIR SEATON clarified that when the committee talks about the
proposed legislation not affecting those in Tier I, II, or III,
it only means that those employees would not be converted to the
new tier.
7:33:36 PM
REPRESENTATIVE GARDNER clarified that, under AS 39.35.095-680,
there are disability benefits under current regulations, and she
doesn't believe that those benefits would continue under SB 141,
for anyone hired after July 1, 2005.
CHAIR SEATON said he would be inviting the [Division of
Retirement & Benefits] to clarify that issue.
7:34:13 PM
JOE DINNOCENZO, testifying on behalf of himself, said he has
been a state employee within the Alaska Department of Fish &
Game for 20 years, spread out over the last 32 years. He said
he has been listening to the prior testimony and thinks the
strongest theme is in relation to recruitment and retention. He
said he thinks the legislature has a strategic choice to make
whether it wants a state workforce with high turnover versus
dedicated employees that are paid at a better rate. He said,
"Anything you do at this point to devalue the benefit package
that is currently being offered state employees is only going to
make the problem of recruitment and retention worse, and
probably make state government programs less efficient." He
explained that the changes will not affect his retirement;
however, it will affect state government, which concerns him as
a citizen of the state. He said he sympathizes with the plight
of Wrangell, but said his family has "those same increased costs
in insurance, in fuel, and, on top of that, [in] city property
and sales taxes. He indicated that any increased contributions
required in PERS would be on top of those costs.
MR. DINNOCENZO said:
The state government runs ... partly on the good will
and devotion of state employees to the mission they
are assigned to, and over my career I've seen that
diminish in the work force that I work with. I
certainly wouldn't like that trend to continue; it's
pretty alarming for me.
... I think fairness demands accountability of
whatever board governs decisions about PERS; whether
it's the board we have now, or some combined board.
And I think it's essential that beneficiaries have a
way to help select who's on that PERS Board.
7:37:51 PM
CHAIR SEATON noted that the committee had passed an amendment
regarding the selection of the board members.
7:38:24 PM
JOHN DICKENSON, supervisory employee representative, testifying
on behalf of APEA AFT-SU, said he was born in the Territory of
Alaska and was in the sixth grade when Alaska was made a state.
He has a degree in Civil Engineering from the University of
Alaska. He offered his work history. He said he is a Tier I
employee, who is concerned about the quality of life that he
would enjoy as a citizen of the state. He said he wants his
state government staffed by competent people who know what
they're doing. He also stated concern for his fellow employees
who have less time in service than he does. Regarding the issue
of recruitment and retention, he said he thinks the Department
of Transportation & Public Facilities has been "a really good
place to work with so far" for reasons he listed. However, he
related a difficult hiring experience. In conclusion, Mr.
Dinnocenzo suggested that the committee look at the positions
that are currently being advertised through Workplace Alaska and
consider the listed minimum qualifications and how easy [or
difficult] it would be to fill those positions.
7:43:07 PM
ROSS MARLEY (ph), testifying on behalf of himself in opposition
to SB 141, said he recently spent a year and many dollars to get
a teaching degree, but then decided to go for a career path in
the private sector instead. He said he realized if he were to
go into teaching, he would never have "a financial leg to stand
upon." He continued, "This is unfortunate, because teaching is
an intrinsically rewarding career path; I simply cannot afford
to choose it. Passing SB 141 will simply confirm my choice as a
highly qualified job candidate to leave the public service and
pursue a career path in the private sector."
7:44:34 PM
BARBARA RICH, testifying on behalf of herself, told the
committee that she is a retired teacher who used to be a "watch
dog" in Juneau for the retirement system. She stated that the
retirement system is "in better shape than most people are
trying to say it is." She said most of the problems exist
because of high medical costs. She noted that when a bill for a
retirement incentive program (RIP) was brought before the
legislature in the past, "we testified wholeheartedly against
this" but were not listened to; the legislation was passed
quickly. She added, "Something similar to SB 141." She stated
her hope that the legislature would listen to testifiers this
time. Ms. Rich offered an example of the effects of the RIP,
illustrating just how much money would have been in the
retirement system now if the multiple RIPs had not taken place.
She asked that the legislature does not rip apart the retirement
program. She echoed the previous comments of Ms. Luby that
social security is a safety net where it is offered, but said
there is no safety net for teachers, and they can outlive their
defined contribution. She said the actuaries are not doing a
good job and there is a need to find people who will do a good
job. She asked the committee to take its time.
7:47:51 PM
REPRESENTATIVE GARDNER asked Ms. Rich if she knows of any reason
that the existing PERS and TRS Boards should be changed.
7:48:19 PM
MS. RICH answered no. She said those boards have done an
excellent job. Regarding TRS, she noted that there are two
people on the board who have done such a good job that no one
runs against them. She reported that 40 percent of all
prescription drugs used now are generic drugs, because the TRS
Board requested that people take generic drugs [which save the
system money].
7:49:36 PM
REPRESENTATIVE GARDNER noted that the committee had heard
previous testimony that over the past 20 years, the PERS and TRS
Boards did not take the actuary's advise in terms of setting
rates, which ended up benefiting the system. She asked Ms.
Rich, "Would you concur with that?"
7:51:24 PM
MS. RICH answered no.
7:51:32 PM
REPRESENTATIVE RAMRAS thanked Ms. Rich; he recollected that she
was a school counselor.
7:52:05 PM
JIM DUNCAN, Business Manager, Alaska State Employees'
Association (ASEA), testified on behalf of the approximately
8,000 current active ASEA members in opposition to SB 141. He
stated his belief that the issue before the legislature is a
complex one that deserves serious and comprehensive review. He
urged the legislature to take more time. He noted some of the
reasons for the current problem are: the poor returns on
investments in the stock market, the rising cost in health care
costs, increased longevity of retirees, and the fact that the
state actuaries did not recognize some of these factors and make
the right assumptions and projections. None of the problems, he
said, were, or will be caused by current or future employees,
but the bill asks those employees to assume the responsibility.
He stated for the record that he thinks that's wrong.
MR. DUNCAN reviewed the ways that SB 141 would make those
employees pay: by increasing the employee contribution for all
active employees by .5 percent per year until it reaches a cap
of 11.75 percent. He said that doesn't sound like much, but for
those working at a range 8 or lower, any amount of money out of
their take-home pay is a lot of money. He continued as follows:
I believe strongly that that's an unconstitutional
provision in this bill; that to increase the
contribution rate on active employees violates the
state constitution. And I would let you know that if
this legislature should pass that, ... my union will
be challenging that in court, and I'm sure other
unions will be doing likewise ....
I heard this morning, Senator Stedman - who I've
talked to many times about this bill - say, "Look,
don't worry too much about the .5 percent because they
all have collective bargaining agreements; they'll
just go back to the table and recoup that .5 percent."
There's a problem with that: It's been very difficult
to get ... cost-of-living increases at all for state
employees. In fact, my union has gone for ... almost
three years without an increase, and this year, on
July 1, we're going to get 1.5 percent, and the .5
percent's going to go to the retirement system if this
passes. ... The problem is we don't go back to [the]
table for a new contract until ... July 1, [2007], ...
so to use an argument to justify this ... is wrong.
7:55:27 PM
[Second], you're asking our ... future members to pay
for this problem by moving from a defined benefit
system to a defined contribution system. What you're
saying is the state no longer wants to take the risk
with the stock market; you want the employee to take
the risk and have their benefits hinge on the return
on the investment. And that is not a good ...
scenario for the members that we represent or will be
representing in the future. It takes some
sophistication to have good investments, and I'm not
convinced at all this has that sophistication, but
you're asking our employees to assume that.
Third, this defined contribution system does not have
a provision for disability payments. It does not even
have a real good death benefit, because if a retiree
should pass away, the survivor will only get a death
benefit as long as there's still money left in the
defined contribution system. And that survivor, that
spouse, that wife, may very well outlive that payment,
and at that point they've got a very serious problem.
... There is no safety here for future retirees ...,
and in the State of Alaska, our state employees don't
even have social security to fall back on. Now, other
states have talked about moving from a defined benefit
to a defined contribution system. Some have done that
- Nebraska and West Virginia - and now they've moved
back, because they found it didn't work. One state
was just recently talking about that - the State of
California. Governor Schwarzenegger had it as one of
his major, major initiatives, and just a week ago he
backed off because he also understood, or the folks he
was going to do this to understood, that it wasn't
going to work for them. And his plan, just like this
plan, didn't have a disability, or ... a death
benefit. I think you need to very carefully need to
consider what this bill will do to future employees.
7:57:35 PM
MR. DUNCAN continued as follows:
There are some things that I think you should do, and
you are doing some of those and I congratulate you on
that. Another opinion: Have another set of actuaries
look at those assumptions that were made and make a
determination as to how real this problem is and what
it's going to look like into the future ....
Secondly, I think you should ask that actuary to look
at what's going to be the impact on those current
employees who remain in [PERS]. When you ... no
longer have a pool of new folks coming in to
contribute to [PERS] - all of a sudden there are no
new additions - what really does happen to the
valuation of [PERS] for those current employees, and
what will they be required to do in order to ...
continue to make that system whole?
MR. DUNCAN also recommended that the committee consider the
impact of the proposed legislation on recruitment and retention.
He said, "As someone who ... was in the legislature for 24
years, I know that the State of Alaska has a problem with
recruitment and retention." He indicated he saw that problem as
a former commissioner of administration. He said he knows that
when a defined benefits system is changed to a defined
contribution system, the hard-to-fill jobs become impossible to
fill. He continued as follows:
I heard ... a member of the legislature testify the
other day ...: "Wait a minute, don't worry about
this; we're about number three in the nation now with
our retirement system. This will put us right in the
middle of the pack, and that's where we should be." I
couldn't disagree more. We should never be in the
middle of the pack. We should always be at the top of
the list, and not in the middle of the list. We have
many other problems to overcome to get people to come
to this state to work; ... we need to have a more
attractive system.
7:59:34 PM
MR. DUNCAN encouraged asking the state to look at what liability
the actuaries that made the assumptions over the past few years
might have "in this whole situation." He said he thinks there
should be consideration whether some of the under funding could
be recovered from the actuarial firms who gave the wrong
assumptions. He noted that when he was commissioner of
administration, the last valuation report he received in March
2002 did not indicate a problem. When an audit was done in
December 2003, a major problem was reported. He stated, "Things
don't change that quickly."
MR. DUNCAN concurred with those who testified before that the
legislation does not need to pass this year. He warned, "once
you put something in place, it's going to be impossible to
remove it."
8:00:50 PM
CHAIR SEATON stated for the record that there may be conflicting
legal opinions regarding raising rates for benefits. He asked
Mr. Duncan if the questionnaire sent out by TRS was filled out
and returned by ASEA.
8:01:53 PM
MR. DUNCAN responded that he has been the business manager of
ASEA since February 2003, and he does not recall receiving a
questionnaire from the board. He said if he had received one,
he would have participated.
CHAIR SEATON offered his understanding that NEA-Alaska was the
only union to respond, but he said, "You never know what
happened in the mail." He said he just wanted to get it on the
record that there has been requests for information.
8:02:40 PM
DOUG STARK, DPA [Doctor of Public Administration], testifying on
behalf of himself, noted that he began work as a PERS employee
in the governor's office in 1968, and since then has held 8-10
public sector jobs around the state. He continued as follows:
When I went to work for the City of Homer three years
ago, I opted out of PERS, because I felt it was an
abuse of the ... system to accumulate additional years
at my pay rate of $50 a month as a councilman. Having
worked through three budget cycles, I found that the
increase in required contributions to PERS by the city
is causing intolerable burden on the city and its
citizens. Defined contributions [are] replacing
defined benefits on a nationwide basis because of the
exorbitant cost to employers, and a number of
employers have completely gotten rid of their
retirement systems and sent it over to the federal
pension benefit corporation - which is not good news
for anybody.
DR. STARK said SB 141 is not totally sufficient to solve the
existing problems, but it is necessary in order to solve the
problems in the long term. He said work needs to be done in the
area of health benefits. He concluded by stating, "Your job is
to listen to and represent public employees, but - most
important - to represent all the citizens of Alaska, including
the silent majority, so to speak."
8:04:49 PM
MARY GRAHAM, testifying on behalf of herself in opposition to SB
141, told the committee that she has been a state employee for
approximately 15 years and is a member of APEA AFT. She
concurred with the statements made by former testifiers that
employees did not create the existing problems, but it seems
they and the future employees are the ones being made to pay.
She directed attention to page 5, lines 21-24, as numbered on
Amendment 4, which read:
"Sec. 39.35.870. Retirement. (a) In order to
obtain medical benefits under AS 39.35.870 an active
member must retire directly from the plan. A member
is eligible to retire from the plan if the member has
been an active member for at least 12 months before
application for retirement and
MS. GRAHAM asked, "What happens if someone works 10 months into
the year that they're ready to retire and, because of budget
cuts or whatever, their job's gone ... - they get laid off and
they're in a rural part of Alaska where there's not going to be
another PERS-type job for them to go to? A long-term employee
could lose their ability to have health insurance." She said
she doesn't think that's the intent of the drafter of the bill.
She recommended that the committee slow down and really consider
"all the consequences of what's going to happen here." She said
her own Tier I plan was attractive to her for the health
insurance it gives, but that may not be available for other
[tiers]. She remarked that she is also a hiring manager who is
having a difficult time filling positions. She said, "I don't
say anything about retirement and benefits when I try to attract
people, because it's not that attractive. And it's going to be
a lot less attractive if we go to this defined contribution
system."
8:09:17 PM
KEVIN RITCHIE, Executive Director, Alaska Municipal League
(AML), stated that 63 percent of the $5.7 billion problem is
"owned by municipalities, schools, and the university." He
continued as follows:
Where PERS rates are rising is 30 percent of salary or
above, which, in a normal city which spends about 70
percent of its budget on salary, can be as much as a
20 percent overall increase in total spending for that
community. Schools [are] much higher, because many
times I think that 90 percent or so of their budget
may go into salaries. So, this is part of a long-
range plan. Municipalities [have been] working at the
table with the legislature [and] with PERS/TRS Boards
for the past year. We've been working with a group of
school district business officials, municipal finance
officers, elected officials, [and] some
representatives from the university along every step
of the way.
MR. RITCHIE said SB 141 is similar to the concepts that have
been discussed for the past year by the PERS and TRS Board [and]
by the House and the legislative committees working on this
issue. He reported that AML adopted its policy a year ago. He
indicated that two of the more relevant issues are:
stabilization of the cost of the PERS/TRS system to
municipalities and help with funding unexpected massive
increases in the cost of the PERS/TRS system. He said [AML]
provided a letter to the committee on April 2, which has more
detailed comments [included in the committee packet]. He said
PERS rates of 30 percent are projected out for the next 25
years, so "there's not a relief in sight." The proposed
legislation "or something similar to it" provides some hope that
those rates will go down over time.
MR. RITCHIE stated that [AML] will continue to work with the
legislature on SB 141. He mentioned some amendments that were
made earlier today, which seemed to make some significant
improvements on both access to health care and access to the
health reimbursement account. He concluded:
I guess we'd just say that we're in support of the
efforts that you're making to bring the system under
control for the long term in this effort. And [I]
just want to emphasize that providing some help -- the
state simply has more money than its communities.
There's some communities that are in fiscal crisis or
are sliding backwards in the fiscal crisis, and we
want to just emphasize the governor's budget amount of
providing at least some funding for the next few years
to the municipalities and to have a chance of kind of
digging themselves out of the hole.
8:13:00 PM
REPRESENTATIVE GATTO said Mr. Ritchie made a salient point
regarding the school districts.
8:13:51 PM
REPRESENTATIVE GARDNER expressed her appreciation of Mr.
Ritchie's explanation of the percentage increases that
municipalities are facing. She asked Mr. Ritchie to confirm
that SB 141, in creating a new tier, would put the risk on the
employee, reduce the risk to the employer, and reduce the amount
of the growth of the shortfall; however, it would not address
the problem that the state is already facing, other than "the
one-time direct funding grant thing." She asked if that was an
accurate summation.
8:14:36 PM
MR. RITCHIE answered yes. He said the $5.7 billion shortfall is
still there, which is the biggest crux of the problem. He
added, "However, when you look at that over 25 years, whether
that liability goes up or those rates continue to go up, or
those rates stabilize or continue to go down, that's a function
of changes to the system, as well."
8:15:49 PM
TOM BRICE testified on behalf of the Alaska State District
Council of Laborers, which consists of two private unions and
one public union: Laborers Local 341, Laborers Local 942, and
Public Employees Local 71, respectively. He said the central
issue of SB 141 is the proposed change of the state's retirement
system from a defined benefit plan to a defined contribution
plan. He said that fundamental change would not address the
issues that the actuaries pointed to regarding the under
funding, and it would seriously erode the employees' ability to
have a safety net upon retirement. He said neither the House
State Affairs Standing Committee nor any other committee has
held a serious discussion about "how a defined program should
work." Instead, the focus has been on the negative aspects of a
defined benefit plan. Mr. Brice reported that the employees he
represents in the private sector enjoy a defined benefit program
that is stable and secure. He said he thinks the discussion has
to be turned away from defined contribution and focused on the
defined benefits programs currently being enjoyed in the private
sector.
8:18:58 PM
REPRESENTATIVE GARDNER asked Mr. Brice to provide the committee
with a list of some of the [private] companies that he feels
provide stable and solid defined benefit programs.
8:19:14 PM
MR. BRICE offered the following names: Brice, Inc; Wilder
[Construction Company]; Secon; and Coogan [Construction]. He
added that the list is long and extensive. He explained, "Those
are union employers. They know that if they invest into their
employees and they're able to provide their employees safe,
reliable retirements, ... they'll get better employees.
Regarding the previously mentioned surveys sent out by the
PERS/TRS Boards, he said he's certain those surveys were not
sent to the private unions or the private retirement trust. He
concluded, "And I think there could be a real good lesson
learned from the way those programs are administered and the
benefits they're able to provide ... our members."
8:20:23 PM
REPRESENTATIVE GARDNER said it is known that nationally there
are longstanding companies that have gotten into trouble with
defined benefit plans. She asked, "Do you have any idea what
the common elements are of the plans that you think are safe and
secure?"
8:20:49 PM
MR. BRICE answered that one of the primary common elements is
that they are jointly administered; representatives of the
employees have a say equal to the employers, regarding the
administration of the trust. Mr. Brice also recommended
consideration of how many various employers are "engaged in that
retirement trust." He explained, "These programs that I'm
speaking of ... have hundreds of contractors participating in
them, so there's a wide variety of insights and input into the
way that program's administered to meet the needs of the working
people."
8:21:42 PM
REPRESENTATIVE GARDNER said there has been a lot of testimony
that one of the biggest problems that has led to the under
funding of the retirement systems is the massive and unexpected
increase in health care costs. She asked, "Do you know how
these programs have dealt with that, or do they limit the access
to health care or the total amount that can be spent?"
8:22:00 PM
MR. BRICE noted that under the Laborers Local 341 and Laborers
Local 942 programs, medical care is not necessarily a vested
benefit; it is available to employees if they want to purchase
it, but it's not a vested benefit. Furthermore, he said members
have to spend a certain amount of time in the trade -
approximately 20,000 hours for the laborers - before being able
to purchase the health benefit.
8:22:57 PM
CHAIR SEATON asked Mr. Brice if he has any information showing
that public sector employees would support eliminating health
benefits in their retirement plan and instead be responsible for
purchasing their own benefits. He noted that, based on the
surveys he's seen, employees in the public sector have said the
health benefit is the most important part of the benefit
package.
8:23:52 PM
MR. BRICE responded that he thinks "it would be a point of
conversation to start." He said he is not the local business
manager of Local 71 and would defer to that person's judgment.
In terms of the entire debate, he said what's been missing is
bringing the organizations that represent the employees to the
table in a meaningful manner and presenting options.
8:25:06 PM
JIM HORNADAY, Mayor, City of Homer, testified in support of the
provisions in SB 141 "providing some $69 million over the next
two years, as the governor recommended, to offset the cost of
the state-required ... temporary help ... [to] pay the municipal
PERS increase for the next two years." He said he realizes that
this is just a temporary approach, but the City of Homer hopes
to have increased retail sales "that should help in this." If
the money is not included in the bill, for example, the City of
Homer will have to pay an additional $245,000 per year, and
there may be decreased city services. He remarked, "We're told
that Homer now owes $6 million in the PERS situation." The
citizens of Homer recently increased the city sales tax, and he
offered his understanding that the Kenai Peninsula Borough is
about to increase its sales tax. He added, "So, we do believe
that the State of Alaska should share in these increased PERS
costs." Mr. Hornaday concluded, "I certainly wouldn't predict
what the supreme court is going to do, but if you haven't
already included it in your bill, you might include the
provision that just because one provision is [stricken], it
doesn't strike down the other provisions."
8:26:48 PM
REPRESENTATIVE GARDNER asked Mr. Hornaday if he would still
support SB 141 if it didn't include the $69 million or any
amount of money to help the municipalities.
8:27:21 PM
MR. HORNADAY responded, "That is on our next agenda; there's a
resolution to that effect, and we can tell you that after the
council votes on it this next Monday night." He offered his
understanding that the Alaska Municipal League has taken the
position of being in general favor of the bill; however, he said
he would rather have AML speak directly to that. He stated that
as a retired Tier I state employee and a person who has run 5
small businesses, he understands the problem and sympathizes
with the way in which the legislature is trying to address it.
8:28:09 PM
REPRESENTATIVE GRUENBERG noted that there is a general
severability clause in Title I "that would apply."
8:28:27 PM
REPRESENTATIVE ELKINS asked Mr. Hornaday how many people within
the PERS and TRS retirement systems come from school boards,
borough councils, and city councils within his area.
8:28:53 PM
MR. HORNADAY estimated 20 people are elected municipal
officials, but he said he doesn't know the numbers for the
school board.
8:29:39 PM
CHAIR SEATON asked if the City of Homer has "looked at that in
any detail." He noted that "the city's liability is basically
yearly proportional to retirement and benefits." He asked if
the city has discussed that issue.
8:30:17 PM
MR. HORNADAY said the issue will be addressed.
8:30:41 PM
REPRESENTATIVE ELKINS stated that there are a lot of people who
drew $150 a month for five or six years and are now retired in
Tier I and II and are drawing the medical benefits. He said,
"It's a big burden on cities when they didn't contribute
anything start with."
8:31:25 PM
TOM HARVEY, Executive Director, NEA-Alaska, told the committee
that NEA-Alaska covers 12,500 public school employees. He
offered happy birthday wishes to Representative Elkins.
Regarding the composition of a new board, he said the passage of
Amendments 5 and 6 this morning was appreciated; however, he
stated a preference that the boards be elected as the PERS
members are now, because that is an essential process of
ownership of the systems by the participants, as well as part of
the democratic process of the country.
8:33:21 PM
MR. HARVEY, in response to a question from Chair Seaton
regarding how TRS Board members are selected, explained that,
presently, the associations that represent teachers and public
school employees make nominations, and the governor makes the
appointment. In response to a follow-up question, he clarified
that the preference is for both PERS and TRS Board members to be
elected, [rather than appointed by the governor].
8:34:04 PM
REPRESENTATIVE GRUENBERG noted that Mr. Harvey included an
amendment idea in his testimony [included in the committee
packet].
8:34:47 PM
MR. HARVEY said the earlier adopted amendment took care of "the
numbers part of what we were talking about." He directed
attention to page 1, line 29, through page 2, line 11, of his
handout, which addresses "the election part." He urged the
committee to consider an amendment there.
8:36:13 PM
MR. HARVEY stated that NEA-Alaska also believes that the powers
and duties of the Alaska Retirement Management (ARM) Board
should include hearings. He quoted Richard Solie, Ph.D., as
follows:
Because the boards act as a jury of peers, in essence,
I believe the board approach reduces the risk of
future litigation and gives the [beneficiaries] a
greater sense that their cases have been truly heard.
MR. HARVEY stated, "We would urge you to consider an amendment
that would provide that. You could do it through a
subcommittee. It would not have to be, and should probably not
be, the whole board that would do that particular provision, but
we do believe that their function has served well in that
capacity."
MR. HARVEY, regarding the employee/employer contribution to a
defined benefit plan, stated that it is disturbing to [NEA-
Alaska] that the contribution of the present employees would be
increased at .5 percent a year until it equals the normal rate,
divided in half between the employer and the employee. He
continued as follows:
In fact, at first it sounds like a very small thing.
But if you look at what happens in 2020, according to
the actuaries ... it's going to require 52 percent.
That would mean 26 percent from the employer, under
this bill, and 26 percent from the employee. That's
how the bill read, I believe.
8:37:14 PM
CHAIR SEATON clarified that SB 141 only deals with the normal
service cost. He said, "The bill that you were talking about is
the normal and the past service cost, which was [HB] 177, which
we passed out of committee so that Representative Kelly could
work on it, and that split the normal and the past service
cost."
8:37:57 PM
MR. HARVEY suggested that - "even at the split of the normal
service cost, as being presently projected" - a present employee
is going to end up paying a lot more than he/she currently does.
He said, "What you're really going to do is allow them to have a
decision to leave the system." He clarified that employees will
be faced with a choice of paying more for the same benefits they
are presently receiving, or retire now and get the benefits for
a longer period of time, which he said will "add to that
liability situation that you're talking about." He said that's
a serious flaw in [SB 141].
MR. HARVEY, again regarding increasing the employees'
contribution without increasing the corresponding benefits,
said, "This is clearly charting a course through the troubled
legal waters through the Alaska [State] Constitution." He
continued as follows:
And I've heard your comment earlier. I think I would
say to you, sir, that we have a legal opinion from a
former member of this body who has been quite
successful at enforcing the rights of the employees
and their retirement benefits. But I would just as
much say you need to look at what Dr. Richard Solie
said, who is also being counseled. They did not
consider this approach, because of the concern about
the response of the judiciary. I think the numbers
are pretty clear at this point in time. If anything,
if you don't think that that's true, I would suggest
that you look at another avenue to get a legal opinion
- maybe even a referral to the House Judiciary
[Standing Committee] - same as you did with [HB] 177.
That would be able to take care of the matter.
MR. HARVEY offered his understanding that Amendment 1 failed
this morning. He said it's clear to [NEA-Alaska] that 8 percent
and 4.5 percent, equaling a total of 12.5 percent, is not enough
for a person to have invested so that they can end up with an
annuity that they can retire with dignity. He said, "We've
worked the numbers; 12.5 percent doesn't get you there. We
would suggest to you that ... the rate should be closer to
19.25. We would suggest that the ... employers' contribution
should be 14 percent total, of which a portion of that 8.25
[percent] would go to the pension, and that the employees'
contribution at 11 percent - as in another bill before this
committee - ... would in fact get you to at least a 19.25." He
stated that the defined contribution plans with which he is
familiar require about 20 percent minimum in order for the
employee pension to be one that they can retire on.
MR. HARVEY said SB 141 asks employees to provide more, which
would be wonderful if the employees were compensated at a higher
rate; however, as public employees, they are not.
CHAIR SEATON let Mr. Harvey know that time was limited and he
indicated that he would like to move to committee questions.
8:41:44 PM
REPRESENTATIVE RAMRAS asked Mr. Harvey if he could name a
private sector employer offering 19 percent.
8:42:03 PM
MR. HARVEY answered that NEA-Alaska is as private sector
employer that offers 20 percent.
8:42:18 PM
REPRESENTATIVE GARDNER opined that since Mr. Harvey represents
12,500 people, it is appropriate to allow him more time than is
given other testifiers who represent themselves.
CHAIR SEATON said he has been attempting to do that.
8:42:47 PM
MR. HARVEY noted the amount of time spent on bill discussion and
amendments and said he thinks the 2-plus hours given to public
testimony on a 109-page complex bill is insufficient.
8:44:27 PM
MR. HARVEY said the previously adopted Amendments 8, 10, and 12-
14 are appreciated. He thanked Chair Seaton and Senator Stedman
for the hours spent with NEA-Alaska regarding [SB 141]; however,
he stated that that time cannot serve as a substitute for
meetings of all the stakeholders to provide a complete analysis
of the legislation and its effects on public servants.
MR. HARVEY directed attention to the second page of his written
testimony - the last paragraph, which read as follows [original
punctuation provided, with some formatting changed]:
If a teacher starts their career in Sitka this fall,
they will have a salary of $35,571 (SEE ATTACHMENT 2A
& B). After a thirty-year career (That is 3 more
years than the present average), the teacher will have
$800,129 in their account. That assumes a return on
investment of 8.3%, which is 2.3% higher than an
individual averages presently and is more the rate of
return by ASPIB. They will also have ... [a health
reimbursement account (HRA)] of $131,772. Their
access to major medical insurance will cost $96,602 in
the first year (given an 8% annual inflation of
medical costs). At age 62 the public servant will
have no medical coverage or be in debt by $141,897.
This is not retirement with dignity.
MR. HARVEY added, "That's retirement eating cat food, and eating
it outside, because they lost their house." He stated that SB
141 is not a good bill; however, he said he believes there are
improvements that can be made with cooperation between NEA-
Alaska, and the legislature. He concluded, "I believe we can
find a good retirement system that is better than the present
TRS [Tier] II and PERS [Tiers] II and III, but we need a little
time."
8:47:22 PM
REPRESENTATIVE RAMRAS, regarding the issue of time given to
testimony, recognized Mr. Harvey's dissatisfaction, but said the
committee has been addressing the PERS/TRS issue since February.
He complimented Chair Seaton for his efforts to create a
constructive environment and address "the broader issue of how
we're going to integrate a better solution for PERS and TRS."
8:48:09 PM
MR. HARVEY agreed that the committee has spent a lot of time on
this issue and he recognized the excellent job Chair Seaton [and
his staff] have done on research towards the House's version of
PERS/TRS legislation. However, he said, "Instead of taking the
best of two products, we've apparently made a decision [at] some
point to rush to judgment."
8:48:58 PM
RON KING, testifying on behalf of himself, told the committee
that he is both a state employee and a hiring manager. He
indicated that he could tell many stories illustrating the
difficulty in hiring employees. He made the comparison that 15
years ago there were 10-15 highly qualified job applicants,
whereas today [hiring managers are] lucky to get one, and
sometimes it takes months of waiting to find a good candidate.
He told of a bright employee being urged by a private entity to
take a job at twice the price. That employee chose to serve
Alaska and return to the state "something that it gave to him."
8:50:41 PM
MR. KING said when his son graduated with honors from college,
the Department of Administration's Division of Personnel offered
him a chance to come back to Alaska to work, and his student
loans would be forgiven. His son opted to continue his
education to get his Masters degree in computer sciences, and he
received more as an intern in college than the state paid the
analyst programmers at that time. He continued working for [the
computer company for which he interned]. He said his son
doesn't have a defined benefit plan, but basically has a "stock
profit-sharing plan." Mr. King noted that his son's medical
benefits are the same as his own, but after nine years of
working, his son can retire with a net worth of 4-5 times what
Mr. King has in PERS, SBS, and deferred compensation combined.
He revealed that his son listed two reasons a person would work
for government: One is because a person believes in what he/she
does, and thus is willing to work for less in order to try and
make a difference. The other reason is for the benefits. Mr.
King said the benefit packages have been significantly
decreasing. He expressed his appreciation for the tough job of
the state, borough, and city officials.
8:53:08 PM
MR. KING asked the committee not to rush into a decision that
may be regretted in the future. He said the problems may or may
not have been entirely the responsibility of the legislature,
local governments, and the actuarials, but he indicated that he
does not want the legislature to rush through decisions of such
magnitude, even with the extensive discussions and debate that
has taken place since February. He said, "Our future is the
generations we leave behind us, the services we want them to
enjoy, and the life we want." He said he will never see his son
back in Alaska, but hopefully the beauty of the state and the
benefits provided [in public jobs] will still attract a few
people. He predicted that if the benefits diminish further, "we
probably will not see that kind of migration again."
8:55:04 PM
CHAIR SEATON said he has heard from several people in the human
resources business that the current retirement package does not
attract people, and he asked Mr. King if he thinks a portable
system will attract people if it is at a high enough rate.
MR. KING responded that there are two competing factors: one is
the benefit package. He indicated that when those who are in
Tier III realize what their benefits are, "they're not exactly
enthused." He said, "The legislature, I think, made some
changes here that if they stayed for an extended period of time,
[et cetera], they might be able to ... buy their medical
benefits." He said there are options like that he thinks the
unions would be open to discuss, or at least he would be willing
to look at some adjustments. He said he is not happy with the
company presently handling insurance claims. He stated that one
of the biggest problems is the salaries. He said, "You could
probably do some things with the benefit package if you had a
salary commensurate to what my counterparts are in private
industry: 50-70 percent more than what I'm making right now.
He said he just lost an engineer at the department who went to
work for a private company for 1.7 times his salary. He said
the state will hire people right out of college and cover the
expense of training them, and he has seen those people leave
after between 3-7 years to work in the private sector at many
times the salary.
8:58:11 PM
MR. KING revealed that he is a range 22, is in longevity, and he
estimated that he has one more merit step. He noted that the
last small increase that was given did not set his operating
costs. When that type of situation exists, people make
decisions. He said he is at the end of his career and made
choices to turn down offers outside Alaska. He said employees
are the single most valuable asset.
8:59:20 PM
BETH WYTHE testified on behalf of herself. She explained that
although she is on the Homer City Council, that council has not
yet given a decision on the issue. She said the bill, in and of
itself, is not a bad idea; however, there are valid concerns.
One concern is people outliving the existence of their benefit.
She said she was glad to see the removal of the option for
employees not to have any opportunity to direct their investment
if they are going to have a defined contribution. She said most
employees feel better if they have the ability "to say where it
goes," and having the option of advice given to the employees as
to how to invest conservatively or aggressively is helpful. Ms.
Wythe revealed that she works in the field of human resources
and helps employees with their 401K and pension benefits on a
regular basis, which is why she said she has a concept of what
employees think when putting money into a fund.
MS. WYTHE said she had been in Juneau less than 24 hours and had
already heard three different variations regarding the problem
with the PERS/TRS issue. She said the only one that is
consistent is that the majority of the problem arises from the
escalating health insurance benefits. She said she heard that
the actuarial evaluation currently being used is based on a 12.5
percent increase for two years, which then would drop back to a
5 percent increase. She said, "Having the luxury of looking at
our benefit on an annual basis, ... [they] have been escalating
between 15-25 percent for ten years. So, presuming that it's
going down to something less than 15 percent any time soon I
think would be a short-sighted actuarial evaluation."
9:02:22 PM
MS. WYTHE offered her understanding that a two-year funding
amount of $37.5 million, to be used by municipalities to "get
through the initial phases of transfer" and new tier related
alterations, has been removed from the budget and tied to the
passage of [SB 141]. She said, "Whether the bill passes or
doesn't pass, I think that portion of it really needs to be
looked at ...." Ms. Wythe reported that the City of Homer is
facing a $250,000 increase per year, for three years, which
means paying $750,000 in three years, in addition to the regular
increase in the expense of the PERS program. She indicated that
the increased costs would stretch through approximately 20 years
before it would "drop back." Furthermore, Ms. Wythe noted that,
over the last few years, the City of Homer has experienced
"reduced revenue sharing to the tune of about $800,000." The
basic costs of running the city equal "a staggering barrier ...
to get across." She said, "We did have a 1 percent sales
increase this year, which, if we absolutely change nothing about
the way we run our city, will be exhausted just paying for the
increase of insurance in the next two [to] three years." Ms.
Wythe said the City of Homer has one of the highest sales taxes
in the state, at 6.5 percent; therefore, "it's not like raising
our sales tax is going to resolve this issue."
MS. WYTHE stated that she understands and recognizes the
concerns regarding recruitment. She said municipalities are not
high-paying employers, but they have always been able to offer a
good benefit package. She said she hears employees of the City
of Homer saying that that benefit package is getting worse by
the year, "and they're not even talking about the retirement
portion, particularly."
9:04:35 PM
MS. WYTHE continued as follows:
I would like to see, at a minimum, that the state
would - as they walk through this process - come up
with a mechanism for funding that 8.25 percent
interest that is on that $5.7 million bill, which, ...
in and of itself, is a staggering amount of money.
I've heard comments that they were considering maybe a
bond issue, or something, that would be able to ...
pay it down and bring it in at a lower interest rate
that would help people with that.
MS. WYTHE said SB 141 is not a bad idea and the legislature is
on a good track; however, she stated her belief that spending
more time on the issue and hearing public comment [would be
beneficial]. She said it has been interesting to hear the
testimony and "the state side of it." She said under funding is
essentially the problem of management. She echoed the question
of a previous testifier by asking, "Is there money out there
that could be somehow recaptured as an errors and omissions
funding opportunity, and have we really exhausted those
options?" She stated that a better future evaluation process
with more regular reviews is needed to avoid a repeat of the
current situation; however, requiring current employees to pay
for something that's already happened is not necessarily the
right mechanism.
9:06:05 PM
REPRESENTATIVE GRUENBERG asked Ms. Wythe to expound on her
comment regarding errors and omissions.
MS. WYTHE explained:
In our business, we buy our retirement insurance from
a corporation, and if they should fail to properly
assess us, so that we fell back to this point, we
would be going back to them and accessing their errors
and omissions. They made an error in your actuarial
evaluation somewhere. Have we explored thoroughly
whether there is a fund out there that should be
helping recapture these funds? That's what I'm
asking.
REPRESENTATIVE GRUENBERG said he has asked related questions and
is "not totally satisfied with the answer."
9:07:19 PM
MS. WYTHE, in response to a question from Representative Gatto,
said the City of Homer currently has a position open for an
equipment operator that it will have trouble filling. She
explained that that job in the private sector pays $40 per hour,
while the city's position will pay $20 per hour. In response to
a follow-up question from Representative Gatto, she said she
doesn't work with the city, thus she doesn't know if the city
ever asks an applicant why he/she turned down a job offer in
order to know if they can "sweeten the pot." She said a review
of salary rates is done every five years, but the city doesn't
have a means by which to offer more during an interview process
to entice the applicant to accept the offer. She also noted
that the hiring competition is not between the state and
municipality, but between those two entities and the private
sector.
CHAIR SEATON noted that part of the bill deals with the subject
of having more frequent actuarials.
The committee took an at-ease from 9:09:54 PM to 9:23:56 PM.
MELANIE MILLHORN responded to a request from Chair Seaton to
answer previously asked questions. She recalled that
Representative Gardner had asked a question about disability.
She said Representative Gruenberg had observed to Senator
Stedman that SB 141 does not include disability benefits, and
Senator Stedman confirmed that is accurate. She explained that,
under SB 141, employees would have disability benefits under
workers' compensation and, additionally, could purchase
disability benefits "to supplement that particular area." She
noted that Representative Gardner had observed that there are
disability benefits under AS 39.35.410, under the defined
benefit plan, which she said is accurate.
9:28:05 PM
MS. MILLHORN, in response to a question from Chair Seaton, said
[under the current defined benefit plan] active employees who
are injured on the job have benefits for that particular on-the-
job injury, in addition to workers' [compensation], and are
covered for non-occupational disability benefits after they
vest.
9:29:34 PM
MS. MILLHORN, in response to a question from Representative
Gruenberg, explained that there are two distinctly different
disability benefits available for non-occupational
circumstances: "One would be after you're vested and you would
have that benefit through PERS or TRS," and the other would be
the additional short- and long-term disability benefits that can
be chosen during the Select Benefits open enrollment period,
including optional life insurance. In response to a question
from Representative Gruenberg, she clarified that short- and
long-term disability addresses income replacement.
9:30:24 PM
MS. MILLHORN, in response to questions from Representative
Gruenberg, stated that for non-occupational disability under SB
141, a member can, through a premium, purchase short- and long-
term disability benefits. Under the current [defined benefit
system, the employee pays a premium for that short-term and
long-term disability under Select Benefits Supplemental.
REPRESENTATIVE GRUENBERG expressed confusion over what is
covered versus what is optional in PERS and TRS.
9:31:47 PM
CHAIR SEATON clarified as follows:
Under active employment - ... under supplemental
benefits - you can purchase long-term and short-term
disability. There's also disability benefits under
the current defined benefit plan. And so, in the
future the employees will be able to purchase long-
term or short-term under the active or supplemental
benefits, but the defined contribution plan does not
... incorporate a disability death benefit under [SB]
141.
MS. MILLHORN responded, "That is absolutely correct."
REPRESENTATIVE GRUENBERG said, "But we weren't talking about
death benefits."
CHAIR SEATON explained that it's the same thing.
REPRESENTATIVE GRUENBERG asked Ms. Millhorn what exactly the
employees will lose that they currently have.
MS. MILLHORN said what would not be there would be occupational
and non-occupational disability. She said, "They have to vest
in order to be eligible for non-occupational disability." In
response to follow-up questions from Representative Gruenberg,
she said new members would be able to purchase short-term and
long-term disability benefits by paying the premium for those
benefits. In order to be more specific about the change to
current benefits, Ms. Millhorn said she would need to look
through a booklet. She offered to provide that information in
writing to the committee.
9:34:11 PM
REPRESENTATIVE GARDNER mentioned a press release by the
administration, dated April 26, 2004. She said she doesn't have
a copy of it, but that the last sentence said that PERS and TRS
compare favorably to other pension plans and are "well-
positioned to weather the current pension storm." She asked if
that is still the position of the administration.
9:35:19 PM
KEVIN BROOKS, Deputy Commissioner, Office of the Commissioner,
Department of Administration, testifying on behalf of the
administration, indicated that that statement was not inaccurate
a year ago but should be put into context of all the discussion
and debate that has occurred since that time. He mentioned the
$5.7 billion dollar problem that needs to be addressed. He said
he thinks plans across the country are facing the same problems
that Alaska is facing. He stated his belief that SB 141 is "a
responsible approach to trying to address a very significant
problem." In response to a follow-up question from
Representative Gardner, he clarified that he doesn't think the
press release statement is accurate any longer, given all that
has transpired.
9:37:31 PM
CHAIR SEATON remarked that the full faith and credit of the
state is pledged behind its pension system. He said the
permanent fund can weather the storm, but it's a choice of how
much of the revenue stream should be dedicated to solving the
problem.
9:38:13 PM
REPRESENTATIVE GARDNER said that's accurate, but she explained
that the context of the previously mentioned press release was
that there wasn't really a huge problem, which she said she
doesn't think is accurate, and she just wanted to hear the
administration's current official position.
9:38:39 PM
REPRESENTATIVE GARDNER mentioned a $1 million or $2 million
lifetime cap on medical expenses and $4 million if the retiree
is married. She asked if that is part of the new plan and, if
so, what effect having a cap would actually have on the system.
9:40:58 PM
MS. MILLHORN responded that in 1999 there were some plan changes
that were made to the retiree health plan, and one of them
included changing a $1 million lifetime cap to $2 million.
There were eight or nine changes that occurred, and out of those
changes were increases and corresponding decreases in benefits.
She said, "The design was to ... offset one another so it would
be neutral to the system." Those changes were challenged by the
Retired Public Employees of Alaska (RPEA) and NEA-Alaska; the
State of Alaska was sued for those changes. The case was
remanded back to the superior court. In response to a follow-up
question from Representative Gardner, she noted that the
argument that went forward was that the framers of the Alaska
State Constitution could not possibly have included health care
benefits, because health care benefits were not available to
members until 1970. The court did not agree with that position
and remanded the case back to the Alaska Superior Court to do
further analyses of the approximately nine changes that took
place back in 1999, in order to consider the increases and
decreases.
9:42:10 PM
MS. MILLHORN, in response to a question from Representative
Gatto, said the cap is not often reached; however, she related
one case that was $3.8 million. In response to a question from
Representative Gardner, she confirmed that she has made the
request of Aetna to send a report showing what the average
medical cost is.
9:42:54 PM
REPRESENTATIVE GARDNER said the committee has repeatedly heard
that a huge part of the problem is medical costs, and she said
she thinks the legislature should seriously consider ways to
control medical costs. In order to do that, she said, it is
imperative to know what the average person spends on medical
costs.
CHAIR SEATON noted that the actual figures show that 38 percent
of the unfunded liability comes from medical costs.
MS. MILLHORN confirmed that is correct.
CHAIR SEATON noted that 11 percent of the unfunded liability
came from investment; "the rest is retirement." He said
although [38] percent is a significant portion, people are
overlooking that it's less than half of the problem. He said,
"It's the combination of two that are really kicking us ... and
causing the problem that we're trying to solve."
9:44:16 PM
REPRESENTATIVE GARDNER asked if the actuaries have been queried
regarding the possible effect of a new defined contribution plan
in terms of loss of input to the system.
MS. MILLHORN replied that there was significant analysis
performed that looked at modeling and introduction of a new
tier. She said, "It doesn't provide immediate relief, but after
a number of years it pulls down the line, and then there's a
period of time when ... it goes down below the contribution rate
that would be in existence had a new introduction of a new tier
not taken place." She reminded Representative Gardner that "all
of that modeling is available and is in the tier presentation
information."
9:45:21 PM
CHAIR SEATON asked Representative Gardner to remember that the
modeling rates are "going to be across the employer's total wage
base ..., so, the past service cost is going to be charged on
the entire wage base." However, if a decision was made to
extend under a defined benefit program, it would be possible to
create new, unfunded liabilities under that program, as well,
such as the adoption of the 2002 mortality table. Staying with
a defined benefit program would "create a new past service cost
with that."
9:47:04 PM
SENATOR STEDMAN, in response to an invitation from Chair Seaton
to offer closing remarks, stated that it's the obligation of the
current generation to take care of the current generation's
liabilities, and it's not in the best interest of the state to
pass the $5.7 billion past service liability off to the next
generation. He said, "So, the quicker we get at the final
solution here, the better off we are." He said $5.7 billion is
19 percent of the permanent fund; "it's $26,000 an hour, 24
hours a day, seven days a week, for 25 years." He said the
Senate Finance Committee respectfully disagrees with those who
testified before it saying that it isn't a problem. She said
the problem needs to be dealt with in a methodical and
thoughtful way.
9:50:59 PM
REPRESENTATIVE GARDNER asked if there is a sectional analysis.
SENATOR STEDMAN responded that there is "a walk-through and ...
multiple levels of detail, depending on what you want to read
between now and 8:00 a.m." He said he has data in his office.
[Later he related that a 40-page sectional analysis was
available in the committee packet, but suggested his one-page
summary sheet may be more beneficial.]
REPRESENTATIVE GARDNER noted that the bill is 109 pages long and
has not been available until recently. She said she thinks
having a sectional analysis is not only standard, but also
helpful, and she feels the lack of it in trying to understand
the bill.
SENATOR STEDMAN responded, "That's what we've been explaining -
what it really does." He said there has been a lot of
misinformation and misinterpretation. For example, he said
tonight comments were made that the employees would be funding
the past service cost, which is not the case at all. He said he
has tried to very careful and concise in what SB 141 does and
doesn't do. He added, "But there are other bills in the system
that do different things, and it's very easy to confuse them."
9:53:31 PM
CHAIR SEATON closed public testimony.
REPRESENTATIVE RAMRAS [moved to adopt] Conceptual Amendment
[15], as follows:
On page 7, line 30:
Between "annually" and "."
Insert "and may not exceed ten percent"
On page 69, line 13:
Between "annually" and "."
Insert "and may not exceed ten percent"
REPRESENTATIVE RAMRAS noted that in Mr. Harvey's [written]
testimony, he indicates that NEA-Alaska recommends an increase
in the employers' contribution rate to 8.25 percent and in the
employees' contribution rate to 11 percent. He said 10 percent
would be a full point below, but it is a tithing rate and a
reasonable savings rate.
9:55:35 PM
REPRESENTATIVE GRUENBERG calculated that the total may not be 10
percent.
REPRESENTATIVE RAMRAS answered yes.
9:56:35 PM
CHAIR SEATON objected to Conceptual Amendment 15.
SENATOR STEDMAN said he thinks that a 10 percent limit would be
reasonable if the committee wishes to make that change. He said
a normal service cost is roughly 20 percent. He added, "If you
go to a 50-50 split between employees and employers, that's
roughly 10 percent."
9:58:06 PM
REPRESENTATIVE GATTO asked if Conceptual Amendment 15 refers to
20 times .5 percent increases, or "when it hits 10 percent it
stops."
CHAIR SEATON said it's a cap [at 10 percent]. He asked
Representative Ramras if he would accept an amendment to
Conceptual Amendment 15, to change the language to be added from
"and may not exceed 10 percent" to "and the employees' rate
cannot exceed 10 percent". He reminded everyone that it is a
conceptual amendment, so Legislative Legal and Research Services
will draft it. He also said there may be other areas that need
that language added, but that his understanding of
Representative Ramras' goal is that, wherever applicable, the
language should read that the employee contribution rate will
not exceed 10 percent.
CHAIR SEATON removed his objection to Conceptual Amendment 15
[as amended]. He asked if there was any further objection to
Conceptual Amendment 15 [as amended]. There being none,
[Conceptual] Amendment 15 [as amended] was adopted.
REPRESENTATIVE LYNN moved that the committee adopt Conceptual
Amendment 16.
10:01:35 PM
REPRESENTATIVE LYNN clarified [Conceptual Amendment 16] as
follows:
On [page 46, lines 29-30 and page 47, lines 6-7] where
this occurs, I would insert: "These two PERS trustees
shall be elected by PERS membership" and "These two
[TRS] trustees shall be elected by [TRS] membership".
And then I was going to add two sentences: "At each
election, the candidate who receives the most votes
cast in the election is elected to the seat, and the
governor shall fill a vacancy in the unexpired elected
term by appointment of a member of the system for the
period remaining before the next regularly scheduled
election held under this subsection."
REPRESENTATIVE LYNN, in response to Chair Seaton, clarified that
the language would be added to relate to both TRS and PERS.
REPRESENTATIVE GRUENBERG objected. He moved to adopt an
amendment to Conceptual Amendment 16, to replace the language
suggested by Representative Lynn with "the language that was in
an earlier version of this bill." He continued as follows:
And this is language I passed out. It's at the bottom
of page 46, starting on line 29, and going through
line 11 on page 47. This was the language that
[Legislative Legal and Research Services] drafted to
do just what Representative Lynn wants to do. ... In
case it has to be tweaked, I'll offer that as a
conceptual amendment [to Conceptual Amendment 16], but
I believe this is the proper drafting.
[The following is the language as Representative Gruenberg
referred to it, with original punctuation provided from a two-
page handout included in the committee packet - an excerpt from
Mr. Harvey's written testimony - which shows the added language
in bold, underlined type, inserted at the end of subsection (b),
after paragraph (3):]
Two trustees shall be members of the Public Employees'
Retirement System elected by the members of the
system. Elections shall be conducted by the board.
The two members shall have overlapping terms. At each
election, the candidate who receives the most votes
cast in the election is elected to the seat. The
governor shall fill a vacancy in an unexpired elective
term by appointment of a member of the system for the
period remaining before the next regularly scheduled
election held under this subsection.
Two trustees shall be members of the Teachers'
Retirement System elected by the members of the
system. Elections shall be conducted by the board.
The two members shall have overlapping terms. At each
election, the candidate who receives the most votes
cast in the election is elected to the seat. The
governor shall fill a vacancy in an unexpired elective
term by appointment of a member of the system for the
period remaining before the next regularly scheduled
election held under this subsection.
REPRESENTATIVE LYNN responded, "I have no objection if it
accomplishes the same purpose."
REPRESENTATIVE GRUENBERG answered, "It does."
[The committee treated Representative Gruenberg's amendment to
Conceptual Amendment 16 as adopted.]
CHAIR SEATON objected to [Conceptual Amendment 16, as amended]
for discussion purposes.
REPRESENTATIVE LYNN stated that he thinks it is important that
the general membership of PERS and TRS be able to buy into any
new system that might be put forward. He said the language
would give the membership a direct voice; when people are part
of the process, they are more likely to support board decisions.
10:05:55 PM
CHAIR SEATON maintained his objection. He explained, "We have
set forward a way in which the bargaining unit for these
employees can nominate members for selection. The testimony has
been that the PERS election costs about $80,000 a year." He
said that with staggered terms, that means there would be four
$80,000 elections to accomplish the same thing that could be
accomplished through a nominee process by the bargaining unit.
Furthermore, he said the bargaining units are large and spread
across the state, including many municipalities and school
districts, and the chance that people will have knowledge of the
candidates is slim. He indicated that the bargaining unit
system making nominations will ensure that the employees are
well represented.
REPRESENTATIVE GRUENBERG offered his understanding that Chair
Seaton's argument is regarding cost and lack of knowledge [about
the candidates]. Regarding the cost, he said the board can
conduct the vote by e-mail, which would be virtually without
cost. Furthermore, the nominating process would take place
without the amendment being discussed, and that could involve an
election, which would also have a cost. Regarding the lack of
knowledge, he said the candidate's biography, telephone number,
and e-mail address are provided and the electorate is
knowledgeable. He indicated that if the committee members have
previously chosen to give people a choice of investments, and if
people can make that choice, they certainly ought to be able to
elect the members of the board.
10:09:32 PM
CHAIR SEATON said there are guidelines that [the board members]
must meet, which are simple for the bargaining unit to ensure.
CHAIR SEATON, in response to a question from Representative
Gruenberg, stated that the amendment to Conceptual Amendment 16
had been adopted.
A roll call vote was taken. Representatives Elkins, Lynn,
Gardner, and Gruenberg voted in favor of Conceptual Amendment
16, [as amended]. Representatives Gatto, Ramras, and Seaton
voted against it. Therefore, Conceptual Amendment 16, [as
amended], passed by a vote of 4-3.
10:12:52 PM
REPRESENTATIVE GRUENBERG [moved to adopt] Amendment 17, labeled
24-LS0637\L.12, Craver, 4/19/05, which read as follows [original
punctuation provided]:
Page 7, lines 9 - 30:
Delete all material.
Renumber the following bill sections accordingly.
Page 8, lines 9 - 10:
Delete "calculated under AS 14.25.052,"
Page 68, line 15, through page 69, line 13:
Delete all material.
Renumber the following bill sections accordingly.
Page 72, lines 5 - 6:
Delete "calculated under AS 39.35.162,"
Page 105, line 23:
Delete "sec. 59"
Insert "sec. 57"
Page 108, line 21, following "14.25.047,":
Insert "14.25.050(a),"
Page 109, line 19:
Delete "SECTIONS 139 AND 140"
Insert "SECTIONS 135 AND 136"
Page 109, line 20:
Delete "secs. 139 and 140"
Insert "secs. 135 and 136"
Page 109, lines 21 - 22:
Delete "secs. 139 and 140"
Insert "secs. 135 and 136"
Page 109, line 23:
Delete "Sections 11, 12, 14, 15, 20, 89 - 94,
107, 114, and 131"
Insert "Sections 6, 10, 12, 13, 18, 85 - 90, 103,
110, and 127"
Page 109, line 25:
Delete "Section 141"
Insert "Section 137"
Page 109, line 26:
Delete "secs. 142 and 143"
Insert "secs. 138 and 139"
REPRESENTATIVE GRUENBERG stated that all existing TRS and PERS
members were hired with the reasonable expectation that their
contribution rates were fixed at a contractual rate. Sections 7
and 8 currently provide for "increases to the contribution rate
paid by the existing tiers of TRS members," and Sections 87 and
88 provide for "increases to the contribution rate paid by
existing tiers for PERS members." The current cap, amended this
morning, is 11.75 percent for PERS employees and 13.65 percent
for TRS employees. He added, "The bill language is uncapped,
though it calls for up to one half the normal rate." He said
that is a change from what is currently 6.75 percent of salary
for 30 years for PERS employees and something similar for TRS
employees. The proposed amendment would allow the legislature
and committee to "address the current employees in a deliberate
fashion, without the specter of a constitutional lawsuit." He
reminded the committee that Article 12, Section 7, says a
contractual relationship exists and, "under the language here,
it's probably unconstitutional."
REPRESENTATIVE LYNN requested that Amendment 17 be tabled until
the committee meets again the following morning.
REPRESENTATIVE GRUENBERG responded that he would accept that.
CHAIR SEATON said there is a motion to table Amendment 17. He
asked if the committee wanted to vote on it.
REPRESENTATIVE GATTO said, "I object."
REPRESENTATIVE GRUENBERG said he is withdrawing Amendment 17 and
said, "I'll just serve notice that I will offer it again."
[SB 141 was held over.]
The committee took an at-ease from 10:15:20 PM to 10:16:44 PM
ADJOURNMENT
The meeting was recessed at 10:17:17 PM. The meeting reconvened
April 20, 2005.
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