Legislature(2005 - 2006)CAPITOL 106
04/28/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB22 | |
| HB161 | |
| HB283 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 22 | TELECONFERENCED | |
| + | HB 161 | TELECONFERENCED | |
| *+ | HB 283 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 161-REEMPLOYMENT OF RETIREES CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 161, "An Act relating to reemployment of and benefits for retired teachers and public employees and to teachers or employees who participated in retirement incentive programs and are subsequently reemployed as a commissioner; repealing secs. 5, 7, and 9, ch. 58, SLA 2001; providing for an effective date by amending the delayed effective date for secs. 3, 5, 9, and 12, ch. 57, SLA 2001, and repealing sec. 13, ch. 58, SLA 2001, which is the delayed effective date for secs. 5, 7, and 9, ch. 58, SLA 2001; and providing for an effective date." [Before the committee was the committee substitute (CS) for HB 161(HES).] 8:53:37 AM JIM VAN HORN, Staff to Representative Jim Elkins, Alaska State Legislature, introduced HB 161 on behalf of Representative Elkins, sponsor. He noted that the committee packets include a committee substitute (CS), labeled, 24-LS0645\Y. He said the bill would extend the sunset date for legislation enacted by House Bill in 242, in 2001, and Senate Bill 94, in 2003. It would allow the rehire of certain [Public Employees' Retirement System (PERS)] and [Teachers' Retirement System (TRS)] members who retired with "a normal retirement." "Presently," he said, "these rehires can continue to receive normal retirement benefits if they waive further participation in the retirement system. During their period of reemployment, no contribution to ... PERS or TRS ... is required from the employee or the employer." He noted that that legislation is scheduled to sunset July 1, 2005. 8:54:45 AM MR. VAN HORN directed attention to a report in the committee packet, entitled, "Results of the Retiree Return Program." The report shows that as of November 30, 2004, there were a total of 211 retirees rehired under PERS and 124 [rehired] under TRS. He reported that that equates to one tenth of one percent of all PERS and TRS participants throughout the state. Mr. Van Horn highlighted a paragraph on page 4 of the report, which read as follows [original punctuation provided]: On September 14, 2004 the Division of Retirement and Benefits received an Attorney General Opinion regarding the employment status of returned retirees as of the sunset date of the legislation. The opinion states that once the reemployment amendments to the PERS and TRS statutes sunset on July 1, 2005, reemployed retirees can no longer receive retirement benefits while employed by a PERS or TRS employer. If they continue employment with a PERS or TRS employer, they must begin making contributions to the retirement systems and have their retirement benefits stopped. MR. VAN HORN said this came as a complete surprise to many people. The general opinion was that after the initial period, the legislature would review the program to determine whether or not it was successful and decide if it should be continued. He said people have made "life decisions" based upon this opinion. MR. VAN HORN turned to another handout in the committee packet, entitled, "State Worker Shortage Looms," [dated February 2005]. He said the article shows that "Alaska is not alone." A 2002 study showed that 30 percent of many states' work forces will be retirement eligible by 2006. Compounding that approaching worker shortage, he noted, a Rockefeller Institute of Government study confirmed that nationally, 50 percent of government jobs are in occupations requiring specialized training, education, or job skills, compared to just 29 percent in the private sector. He stated that the problem of workforce shortages will only intensify over time. 8:57:36 AM MR. VAN HORN returned to the report, and noted that pages 13 and 24 include pie charts that show [the number of months between termination and rehire, and rehired retirees by year, for PERS and TRS, respectively]. Regarding page 13, he noted that the majority of the retirees who have been rehired were retired over 24 months before coming back to work, and the percentage of rehires has slowly decreased since 2002. MR. VAN HORN noted that the House Health, Education and Social Services Standing Committee introduced the previously mentioned CS, which clearly states that the legislature understands that the rehire of retirees is a valuable tool for school districts and public employers to use in managing workforce shortages. He stated, "At the same time, the CS finds that human resource managers must plan to meet their future workforce needs without reliance on retired workers." 8:59:26 AM MR. VAN HORN, in response to a request from Chair Seaton, offered details regarding the pie charts on page 13. Because the pie charts in the committee packet are not in color, he explained that the bottom pie chart shows: In 2001, 15 percent; in 2002, 312 percent; in 2003, 30 percent; and in 2004, 24 percent. He said that 2001 really means the 2002 school year. The bottom chart on page 24, he clarified as follows: The years from top to bottom are 2002, 2003, 2004, and 2005, and the correlating numbers are 11, 36, 33, and 20 percent, respectively. 9:01:45 AM MR. VAN HORN let the committee know the correlations between the numbers and months in the top pie chart on page 24 - again, due to the lack of distinguishable colors - as follows: 1 month, 11 percent; 2 months, 25 percent; 3 months, 5 percent; 4-12 months, 5 percent; 12-24 months, 15 percent; and over 24 months, 39 percent. REPRESENTATIVE GRUENBERG observed that each chart is read starting at the top [12 o'clock] position and going clockwise. 9:02:16 AM CHAIR SEATON concluded that that would apply also to the top chart on page 13. 9:02:26 AM MR. VAN HORN noted that there is a zero fiscal note at the present time. In response to a question from Chair Seaton, he explained, "This legislation has no effect on employer contribution rates until the number of members electing the waiver reaches 500." In response to a follow-up question from Chair Seaton, he indicated that the fiscal note is for the CS. 9:03:16 AM MR. VAN HORN urged the committee to pass [the CS]. He noted that there are letters of support from various organizations and individuals included in the committee packet. In response to a request from Chair Seaton, he touched upon some of the differences between the original bill version and the CS. He indicated that one of the changes would be that if a retired employee comes back to work, that employee will have to drop his/her retiree medical plan and work on the state employer's medical plan. The employer would have to pay for that plan for the employee. In response to a question from Representative Gardner, he [clarified that Version Y] would make that change. 9:07:36 AM CHAIR SEATON told Representative Gardner that the House Health, Education and Social Services Standing Committee was concerned that employers were shifting costs to the retirement system by not providing active health insurance for an active employee and saying, "Oh, your primary is your retired coverage." He added, "One of the concerns ... with the function of the bill is not to stimulate employers to not hire new employees by making it cheaper for them to hire retired employees." 9:08:12 AM REPRESENTATIVE GARDNER responded that that's exactly what she is getting at. 9:08:40 AM REPRESENTATIVE GRUENBERG directed attention to page 2, lines 12- 14 [of Version Y], which read as follows: (c) It is the intent of the legislature that employers that benefit from the provisions of the retiree reemployment provisions pay any increase in unfunded liability that results to the retirement systems. REPRESENTATIVE GRUENBERG said he doesn't see that addressed in the fiscal note. He said he finds the issue of retirement a complex one. He said he finds an intellectual and logical interaction between [retirement incentive programs (RIPs)], retirement legislation, and "this sort of a thing." He indicated that he would eventually like a response to this idea. 9:10:17 AM MR. VAN HORN said anyone who has participated in a RIP would not be eligible. 9:10:45 AM REPRESENTATIVE ELKINS commented that one of the reasons for involvement with the bill is that the Department of Fish & Game (ADF&G) has approximately 30 fish biologists involved in the program and it would take the department over five years to recover from the loss [of those employees]. 9:11:26 AM CHAIR SEATON responded, "... But I don't see that they've made a plan for ever coming up with new biologists to take those positions." 9:11:49 AM REPRESENTATIVE ELKINS noted that the bill "requires them to do that." He explained that the department was more concerned about the immediate loss. 9:12:24 AM MIKE TIBBLES, Deputy Commissioner, Office of the Commissioner, Department of Administration, testified in support of HB 161. He stated that it's important to consider "some of the successes that are out there." For example, he spoke of a nurse position that was recruited for 34 days, with four applicants, only one of which was an eligible and available individual. That person had been retired for three years. He offered other examples. There are some jobs that are hard to fill. He said the Department of Administration is involved in overseeing all of the rehires for the State of Alaska. He noted that [Governor Frank Murkowski] signed an administrative order in March that "put some sideboards in place for the State of Alaska." Some of those sideboards include: requiring recruitment, demonstrating recruitment difficulty, and showing the critical components of the job and why no other applicant has the knowledge, skills, and abilities to perform those duties. He said knowing when individuals are eligible to retire gives the department the ability to "do some more planning going forward." He noted that since the governor passed the administrative order, "not one department's been able to meet the test ... of showing us where there's this severe recruitment challenge." 9:17:08 AM MR. TIBBLES stated, "This program is allowing individuals to come back and receive a benefit from the state but not pay into the system, and therefore there's a cost to the system." He also remarked, "Bringing people back from retirement is restricting other individuals' ability to move up in the work force." He said he thinks the bill addresses those concerns, to a large extent. The bill would require employers who hire a retired individual to pay the same past service rate that they would pay for all their other employees, which takes away the incentive to bring somebody back from retirement. The bill also would require that employers provide health coverage for the retirees that they rehire at the same level that they provide health coverage for all their other employees. He said, "It would defer the ... retirement health for the period of reemployment." 9:19:51 AM REPRESENTATIVE GARDNER asked if there is anything else Mr. Tibbles can think of that can or should be done to ensure that the return of people to employment does not result in a cost to the retirement system. 9:20:09 AM MR. TIBBLES responded as follows: I don't think that we want to go all the way to the extent that there is no cost. That would be charging employees to pay for the normal cost rate, as if they were continuing to accrue additional benefits, but they are not when they come back. So, there will be some savings, but we've taken care of the health piece, and we've taken care of the unfunded liability piece. And then with the sideboards that are now in place regarding 30-day recruitment [and] ... demonstrating that nobody else has the knowledge, skills, and abilities to perform that job, I think, in combination - between taking away a big chunk of the financial disincentive, as well as now the new requirements [that] are going to be placed on all employers before they are going to bring somebody back - the combination of those, I think, will create a system that will be really tight, and we'll see more of the examples that I talked about with the nurse and the child service worker as the norm rather than the exception when we look at rehires. 9:21:12 AM CHAIR SEATON clarified that the question was regarding cost to the system. He said: The analysis that we have is that, with them paying the unfunded liability portion, there will be no cost to the system. There may be some slight cost savings to the employer because they're not contributing the normal cost, because there is no future normal retirement; but, as far as a cost to the system, by picking up the unfunded liability portion of their wage base, there is no cost to the retirement system. 9:21:59 AM REPRESENTATIVE ELKINS offered his understanding that there is no grandfather "clause" involved, because "in 3 years it expires anyway." 9:22:15 AM MR. TIBBLES confirmed that is correct. 9:22:27 AM REPRESENTATIVE GARDNER asked Mr. Tibbles what he would think about requiring the retirees to be retired for six months or a year before they could be [rehired]. 9:23:00 AM MR. TIBBLES said the result could be that positions could stay open longer. 9:24:01 AM REPRESENTATIVE GARDNER suggested that some people may retire knowing that they are irreplaceable and will be hired back in 30 days. She said she wonders if those people would reconsider retirement knowing that they couldn't come back for at least a year. 9:24:22 AM MR. TIBBLES said he believes that probably would be the case. He said the question is whether that would be beneficial to the state and municipalities. 9:25:22 AM CHAIR SEATON asked if there is a situation where a person can apply for the position they are in before they actually retire. He offered an example. 9:26:21 AM MELANIE MILLHORN, Director, Health Benefits Section, Division of Retirement & Benefits, Department of Administration, said the recruitment process requires that the position be vacant. She added that there must be a resignation in place from the incumbent. She said there would be not guarantee that the person will be given that position back. 9:27:29 AM CHAIR SEATON said he knows that the person who had the job will be the most qualified. He also said he knows that if there are six [or more] applicants, the retiree who held that job cannot be hired. He asked what would happen if the retiree was one of five who applied for the job. 9:28:02 AM MS. MILLHORN answered that the strictures require that the hiring authority has to demonstrate that the person hired is the most qualified. In response to a follow-up question from Chair Seaton, she said the hiring authority must also demonstrate why the other applicants are not qualified. 9:29:38 AM CHAIR SEATON said that satisfies his concern. 9:30:06 AM MR. TIBBLES directed attention to Section 10 of [Version Y], on page 5, [lines 19-28], which read as follows: *Sec.10. The uncodified law of the State of Alaska enacted in sec. 13, ch. 57, SLA 2001, is amended to read: Sec. 13. REPORT TO LEGISLATURE. Annually, beginning in 2002 and ending in 2009 [2006], the administrator of the teachers' retirement system and the administrator of the public employees' retirement system shall report to the legislature by the 30th day of the regular legislative session concerning the effect of this Act, as amended, on the retirement system. The administrator of the public employees' retirement system shall include information in the report regarding the efforts of employers in the executive branch to address the recruitment difficulties in job classes in which retired members have been rehired. MR. TIBBLES said there are national shortages in certain job classifications, for example, nurses and engineers. He spoke of changing business rules and restructuring positions. 9:31:53 AM REPRESENTATIVE GARDNER said it's the intention of the legislature that the program be a temporary one, which is why the bill has a sunset clause; however, she questioned the need to sunset the bill when there is a growing national shortage in an increasing number of job titles. 9:32:18 AM MR. TIBBLES stated his belief that the rehiring of an individual who has retired is a short-term solution, while the program itself is not. He said the program itself should be reevaluated over shorter periods of time to ensure that it is "meeting its original intent." 9:32:47 AM REPRESENTATIVE ELKINS told Representative Gardner that the legislature is "slowly waking up to the fact that we're not the best payers in the state." He said as that awakening occurs, jobs will be easier to fill, because the state will be more competitive with the private sector. 9:33:22 AM CHAIR SEATON said the other sector to consider is that of the federal government. He noted that in addition to the [previously discussed] report, the legislature would also [in Version Y] require the administration "to develop plans to fill these positions." He said he thinks that has been a critical element that has been lacking. He asked Mr. Tibbles to review the sunset language. 9:35:01 AM MR. TIBBLES said on November 3, a Department of Law position paper was given to all employers and employees participating in the program, which explained that those employees could choose to: stay employed and start accruing and paying for additional benefits, or separate from service and continue to receive their retirement benefits. He stated, "There has been some concern that we had informed individuals, based on the original legislation, that they could continue to receive benefits for the period of their reemployment." That led to concern regarding the state's liability if those individuals that had that expectation and made decisions based on it were cut off. He talked about allowing people hired back on or before November 3 to continue with the program until the end of a specified date, perhaps December [2006]. He added, "And then at that point, the individuals could remain on, but they would have to come back through the regular sideboards that are in the bill." Those individuals rehired out of retirement after November 3 would have known when the program was ending. He made a recommendation regarding when they would be required to follow the sideboards of the bill. 9:37:45 AM MR. TIBBLES said there is some concern regarding those hired back prior to November 3 and their expectation of receiving a retirement health benefit, and he suggested the legislature may want to address that issue. 9:38:13 AM CHAIR SEATON said he thinks that that's an important issue. 9:38:59 AM MR. TIBBLES, in response to a question from Representative Gardner, said allowing those rehired prior to November 3 to continue the program to a specified date is not so much a matter of courtesy, but one of avoiding liability. In response to a follow-up question from Representative Gardner, he said that the liability cannot be completely removed, but it can be lessened. 9:40:21 AM MR. TIBBLES, in response to a question from Chair Seaton, said he hopes to have a written version of the pre- and post-November idea by the end of the day. 9:40:55 AM CHAIR SEATON recapped the concept that Mr. Tibbles had discussed regarding the pre- and post-November rehired retirees. He surmised that there would just be the two categories of rehired retirees. 9:42:11 AM MR. TIBBLES said the only exception would be if the bill passed and was signed into law before July 1, then there would be some grace period until that date. 9:42:35 AM CHAIR SEATON concluded that there really are three categories, depending upon when the bill is signed. 9:42:42 AM REPRESENTATIVE GARDNER asked for an estimate of how many people would be "extended to December of '06." 9:42:48 AM MR. TIBBLES replied that the report shows there are 211 PERS members and 124 TRS members on waivers. 9:43:38 AM KERRY JARRELL, Assistant Superintendent, Bering Strait School District, Unalakleet, Alaska, said the school district has concerns about the possible "expiration of this law." He said the legislation has been successful in assisting the school district to fill important vacancies. He said, "While the number of persons exercising the option has not been large, those individuals have been important to the organizations that have hired them." He said there is a wealth of talent and ability in retirees and their contributions have been enormous. He stated that much has been said about the abuse of the program, but in his district and other rural districts with which he has worked closely, there has been no abuse. He said there are rarely multiple applicants for any job - certified or classified. A recent job opening for an electrician took three months to get one applicant. The applicant pool for school principals is so thin, he reported, that entire job fairs can pass without a single applicant emerging. He said it is ludicrous to think that rural Alaska has a problem with people staying too long in their jobs. Conversely, he said, "Our problem is the inability to attract and retain qualified personnel at all levels." Mr. Jarrell said he doesn't expect the retirement system to absorb any loss whatsoever from the program. He concluded: We readily support the provisions that relieve the retirement system of any negative impact. The employers and employees benefiting from the legislation should pay the cost. We support the continuation of the retire/rehire statutes; this is one additional tool that schools have to attract talented and experienced Alaskans who have much to contribute. It's our hope that you will support extending a responsible retire/rehire provision indefinitely. 9:46:04 AM JEFF BARNHART testified in opposition to HB 161. He noted that he is a currently employed PERS member. He stated that his union - ASCA - is also in opposition to the bill and any grandfathering provisions. Mr. Barnhart said he has been working for the state for 30 years and is aware of widespread abuse of the law. He stated, "Instead of applying the retire and rehire law for just a few isolated cases where recruitment was perceived to be difficult, it was applied widely and has actually become standard operating procedure in state government." He said it is no secret that a percentage of PERS employees have manipulated the system to ensure being hired back before making the decision to retire. In many cases, subordinates and others refused to apply for the position, knowing that they wouldn't get the job, which he explained stops the upward mobility of junior employees and affects recruitment of new employees. He said he just cannot condone "grandfathering these individuals as a reward for manipulation of the system." He opined, "I think to maintain good services for the people of this state, we need to continue to train, promote, and keep our junior employees - not force them from their jobs. They are the future of the state." Mr. Barnhart revealed that he is near retirement and the bill could benefit him, but he reiterated his opposition to the bill. He said he thinks there is plenty of talent available to fill all state jobs, but some pay scales may have to be raised. 9:50:42 AM REPRESENTATIVE GARDNER asked Mr. Barnhart if he is familiar with the provision [in Version Y] that would prohibit the planned rehire of a retiree. 9:51:11 AM MR. BARNHART responded that if it's well known that the person is coming back, subordinates don't bother to apply and put themselves through the process for what they perceive as a "zero chance." 9:52:07 AM REPRESENTATIVE GARDNER asked Mr. Barnhart if he has any experience regarding efforts to recruit employees and the number of "applicants that are currently being received." 9:52:28 AM MR. BARNHART said he works for the Department of Fish & Game in "the Western region" and there has been some difficulty filling middle management positions in past years. However, he said lately there have been good applicants available. He said he doesn't know if "we're turning a corner on that, or what." 9:53:01 AM BARBARA HUFF TUCKNESS, Director, Governmental and Legislative Affairs, Teamsters Local 959, testified in support of [Version Y] to HB 161. She mentioned contract negotiations that took place in 2000, at which time there was great difficulty recruiting certain positions, including nurses and engineers. She named two key elements in recruiting and retaining employees: wages and benefits. Ms. Huff Tuckness said people give up a lot when they quit their [private sector jobs] to work for a public entity. Unfortunately, she noted, through attrition, the benefit package is no longer looking as attractive as it has in the past. She indicated that the Municipality of Anchorage has sideboards in regard to rehiring retired employees. Those individuals applied for positions just as everyone else did, and there was no intimidation. 9:57:04 AM MS. HUFF TUCKNESS said the program is a valuable one; the Municipality of Anchorage saved over $600,000 last year. She recollected that there were 18 applicants who filed waivers, and approximately 12 are currently in the system. She said it has been difficult for municipalities to come up with additional revenue sources to counter budget cuts. She stated for the record that the Municipality of Anchorage did not participate in any of the RIP opportunities, "because they could not justify the cost." She offered further details. She reiterated that she supports the bill and the amendments, as well as "the conceptual amendments that were discussed earlier this morning." 9:58:55 AM CHAIR SEATON closed public testimony. 9:59:28 AM CHAIR SEATON moved Conceptual Amendment 1, which would extend the applicability of the program as follows: through December 2006 for those who signed up before November 3, 2004, and to July 1 for those who signed up after [November] 4. Everyone else would have to live with the sideboards and full conditions of the bill. CHAIR SEATON asked if there was any objection to Conceptual Amendment 1. There being none, Conceptual Amendment 1 was adopted. He said he would get the language of Conceptual Amendment 1 to all committee members before he lets the bill out of his grasp. 10:00:12 AM REPRESENTATIVE LYNN moved to report CSHB 161(HES), as amended, out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 161(STA) was reported out of the House State Affairs Standing Committee. 10:01:20 AM
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