Legislature(1995 - 1996)
04/27/1995 08:42 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 270 - RETIREMENT INCENTIVE PROGRAM Number 359 CHAIR JAMES announced that they had a rather full schedule and it seemed obvious they would not be able to hear all of the bills at this meeting. She was looking for a time to schedule another meeting to complete their calendar of bills, noting that all committee hearings were scheduled to close by the following day. She suggested she may try to hold a meeting at the call of the Chair, if that was possible. REPRESENTATIVE PORTER, Chair, Subcommittee on HB 270, stated that subcommittee met and received information from the Administration on the specific concerns they had and were furnished with examples of how the system would be applied. He felt that all of the questions from the subcommittee were answered to their satisfaction. He stated he was satisfied by the answers from the Administration, that the bill and their application of the bill, would result in this program only being administered to divisions and individuals where they can establish, at that time, that there will be a cost savings. He was still concerned that there was no guarantee that the budget of that unit will decrease the next year by that amount. He said this was the historic problem with former retirement incentive programs (RIP) and he did not have an answer for that concern. He suggested that seeing that the budget decrease was the responsibility of the legislature and trying to come up with solutions towards that goal is everyones job. He recommended passage of the bill out of committee. CHAIR JAMES mentioned her amendment for HB 270, version A/1, which she prepared at the request of people from Kodiak. It was her understanding that the Administration had no problem with this amendment. She asked that the representatives from the Administration address this amendment, as well as the bill, when making their presentation. Number 430 BOB STALNAKER, Director, Division of Retirement Benefits, Department of Administration, stated that having reviewed the proposed amendment, their concern was of timing and being able to meet the needs of employers as they set these time frames. He thought this amendment would accommodate these concerns. He stated he had some suggestions regarding the dates proposed in the amendment, which would make it more likely that the Administration could respond appropriately to employers as they set these dates. On the amended portion of the bill, on page 8, he suggested that the date be changed from October 1 to October 31, because under Alaskas retirement statutes, a person is appointed to retirement the first day of the month following their application. Thus, by setting the date of October 1, the individual would have to wait a whole month, until November 1, before they could be appointed for retirement. Thus, former RIP bills have specified the end of the month. Still referring to the amendment, on line 10, where it states 30 days after their establishment, they suggested changing that to 60 days. That would require the applicant to notify the Administration at least two months in advance of a window period, to give them time to gather information and discuss employee benefits. Referring to the bill, he suggested changing the date on page 5, line 25, from July 1 to June 30. This was because in the teacher retirement system, their service goes through June 30 and they retire July 1. Then they could apply on June 30 and retire on July 1. CHAIR JAMES said they had already heard the presentation from the Administration at an earlier meeting and suggested they hear from those individuals on teleconference. Number 456 MARK LIVINGSTON, in Ketchikan, expressed his support for HB 270. He felt this would help the local school district with their budgeting problems. He cited several examples of areas where the school district had already made cuts. He saw this bill as beneficial by replacing retiring teachers with new ones at a lower pay rate. This would save the school districts a substantial amount of money. He stated the Ketchikan School District was facing a $200 thousand plus deficit for the next year with the funding unit at $61 thousand. There was some discussion of cutting this unit rate to $59 thousand, placing a further strain on the system. According to the Ketchikan School District Manager, there are currently about 40 teachers in the district eligible to retire. Should this bill pass, the school district could save from $67,452 to $85,716 for each retiring teacher over a three year period. He quoted an article from U.S. News and World Report, that 75 percent of the largest U.S. companies had offered some type of earlier retirement incentive program. He thought these types of programs were one of the more viable methods of saving money and thanked the committee for hearing his testimony. MR. STALNAKER mentioned there was one other date he suggested amending. This was on page 4, line 20, and he suggested changing the date from July 1 to June 30. Should the state use this in next year's budget and the budget cut was effective on July 1, then individuals would be in essence terminated before they could take advantage of the retirement incentive program on August 1. Number 512 REPRESENTATIVE PORTER moved to adopt amendment A/1, dated 4-22-95, to HB 270, while also asking for a friendly amendment to this amendment to change line 8 to read October 31, instead of October 1 and on line 10 to reference 60 days, rather than 30 days. CHAIR JAMES asked if there was any objection to that amendment. Hearing none, the amendment was adopted. REPRESENTATIVE PORTER moved to adopt amendment #2, to alter page 4, line 20, of HB 270, July 1 to read June 30 and on page 5, line 25, July 1 would also be amended to read June 30. CHAIR JAMES asked if there was any objection to those amendments. Hearing none, they were adopted. She asked if there was any other discussion on this bill, before they considered passing it out of committee. Number 530 REPRESENTATIVE OGAN had asked in the subcommittee if this bill would be cost-effective not only in the short term, but the long term as well. There had been only one subcommittee meeting and he felt he had not had his question satisfactorily answered. CHAIR JAMES asked if he had not received copies of the documentation from the Administration. She asked Representative Porter to respond to this question. Number 541 REPRESENTATIVE PORTER stated he had instructed that all members of the committee would receive copies of the documentation, including flow charts, of how the bill would work. Additionally, there had been copies of the audit reports of the two previous RIP bills. Having reviewed this information, he had reached the conclusion that this bill was an improvement over the past RIP bills, especially in the way it was intended to be implemented. He felt Representative Ogan was correct that there was no documentation of long term savings as there was no way to establish this information. How this is implemented as a cost savings is up to the coordinated efforts of both the legislature and the Administration. Number 560 CHAIR JAMES expressed some of her concerns and attitudes to the committee. She had reservation of using RIP bills to save money. She stated that industry does not do this to save money, but for employee morale and to make it easier to determine who stays and who goes when downsizing is necessary. She felt this was the current situation of the state at this point. She argued that although the state has been reducing the size of its work force, the legislature had not done a good job of reviewing the statutes and reducing the functions that these people are performing. Because this has not been accomplished, there will be fewer people performing the same amount of work. She felt this would have an affect on the morale of the people who work for the state. She thought that by improving the feeling of those individuals working for the state, it would make them more willing to assist in reducing the cost of state government. She thought it was likely that there could be some money saved in the school districts, but had some concerns about replacing experienced teachers with new ones. Her own school district had expressed concern about replacing experienced teachers with first year applicants. Her district was taking a neutral position on this bill, feeling there were employees who were waiting to retire, until there was another RIP bill that was more advantageous. She expressed concern that having a series of RIP bills was like having a store that always had sales. Items are priced and then sold at half-price, causing people to think they are getting a good deal. Should you want a good relationship in any kind of any employee situation, then you need to set a plan that works and you need to stick with it. In the past, it was necessary to raise the salaries of governmental employees to compete with those of the pipeline and other private sector industry. Now that there is less funding available, the dilemma is how to get back down to a salary that is reasonable to pay. She did not know that this bill would accomplish this goal, but was willing to pass it out of committee, because she thought it did have some merit. To do this, she said she had to put a lot of faith in the Administration, that the things they have promised to do, will be done for the efforts and conclusions they have indicated and that they will be selective and responsive to achieve the results desired. She called for a motion from the committee to pass this bill out of committee. Number 614 REPRESENTATIVE PORTER added there was a reporting mechanism included in this bill and moved to pass CSHB 270 as amended with individual recommendations and attached fiscal notes. CHAIR JAMES asked if there was any objection. Hearing none, the bill passed out of committee.