Legislature(1995 - 1996)

04/27/1995 08:42 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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             
 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                       
 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.                                                 

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