Legislature(2003 - 2004)

01/29/2004 08:01 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 329-RETIREMENT INCENTIVE PROGRAM                                                                                           
[Contains brief discussion of HB 211.]                                                                                          
Number 1853                                                                                                                     
CHAIR WEYHRAUCH  announced that  the last  order of  business was                                                               
HOUSE  BILL NO.  329, "An  Act relating  to retirement  incentive                                                               
programs  for  the  public   employees'  retirement  system,  the                                                               
judicial retirement system, and  the teachers' retirement system;                                                               
relating to  separation incentives  for certain  state employees;                                                               
and providing for an effective date."                                                                                           
Number 1900                                                                                                                     
REPRESENTATIVE GRUENBERG moved to  adopt the committee substitute                                                               
(CS) for HB 329, Version  23-LS1109\H, Craver, 1/28/04, as a work                                                               
draft.   There  being  no  objection, Version  H  was before  the                                                               
Number 1930                                                                                                                     
HEATH  HILYARD, Staff  to  Representative  Lesil McGuire,  Alaska                                                               
State   Legislature,  testified   on  behalf   of  Representative                                                               
McGuire,  sponsor.   He  discussed  changes  made in  Version  H.                                                               
First, he  noted an  important change is  the elimination  of the                                                               
separation incentive program.  Next,  Mr. Hilyard noted the dates                                                               
that  are added  within  lines  4-9, on  page  4,  which read  as                                                               
               (1) to meet the age or service required for                                                                      
     eligibility  for normal  retirement under  AS 14.25.110                                                                    
     before July  1, 1990,  or AS  39.35.370 before  July 1,                                                                    
     1986, as appropriate;                                                                                                      
               (2) to meet the age required for early                                                                           
     retirement under  AS 14.25.110 before July  1, 1990, or                                                                    
     AS 39.35.370 before July 1, 1986, as appropriate;                                                                          
               (3) to reduce the actuarial adjustment                                                                           
     required  for  early   retirement  under  AS  14.25.110                                                                    
     before July  1, 1990,  or AS  39.35.370 before  July 1,                                                                    
     1986, as appropriate;                                                                                                      
MR. HILYARD  said, "The  inclusion of  the tier  dates -  July 1,                                                               
1990, for  the [Teachers']  Retirement System  [TRS] and  July 1,                                                               
1986,  for the  Public  [Employees'] Retirement  System [PERS]  -                                                               
have  the  effect of  limiting  the  applicability of  this  bill                                                               
entirely to Tier 1 employees only."                                                                                             
Number 1997                                                                                                                     
MR. HILYARD said  [the sponsor], as a result  of discussions with                                                               
several school  districts within the  state, has reduced  some of                                                               
the restrictions  on reemployment.   He noted that  that language                                                               
is found on page 11, [lines 3-7], which read as follows:                                                                        
               (3) the individual may accept employment                                                                         
     with a school district as a substitute teacher; and                                                                        
               (4) an individual who participated in the                                                                        
     teachers' retirement system  may accept employment with                                                                    
     a school  district if  the employment  is on  an hourly                                                                    
     basis and  does not  entitle the individual  to receive                                                                    
     retirement, health, or leave benefits.                                                                                     
MR.  HILYARD explained  the concern  of the  school districts  is                                                               
that while  they seek  potential cost  savings in  allowing their                                                               
senior teachers  to retire from  the system early, they  may lose                                                               
the  experience  held  by  those teachers  which  would  make  it                                                               
difficult to  meet the demands  of "no  child left behind."   Mr.                                                               
Hilyard offered to answer questions.                                                                                            
Number 2132                                                                                                                     
REPRESENTATIVE SEATON said:                                                                                                     
     When I  was first contacted  about the bill  during the                                                                    
     interim, the rationale for this  bill was given through                                                                    
     a  teacher retirement  system.   And ...  actually, the                                                                    
     example   that  was   given  was   [in  regard   to]  a                                                                    
     superintendent  and  ...   letting  the  superintendent                                                                    
     retire, and then  designating that ... you  had to hire                                                                    
     from within the system.                                                                                                    
REPRESENTATIVE  SEATON  questioned  if  by trying  to  hire  less                                                               
expensive staff to fill posts  [vacated by higher paid people] in                                                               
an effort to balance the budget,  "we" would actually "build in a                                                               
system that is going to eliminate  the broadest pool of people to                                                               
do those  very highly skilled  and necessary jobs."   In response                                                               
to a question by Mr. Hilyard,  he clarified that when he used the                                                               
word system, he meant the  Teachers' Retirement System (TRS).  He                                                               
added,  "Excuse me,  no,  what I  mean  is the  hiring  of a  new                                                               
superintendent."   He remarked that  it would have to  be someone                                                               
less  expensive  than the  person  "going  out," otherwise  "this                                                               
doesn't work for anybody."  He asked if that is correct.                                                                        
MR. HILYARD answered that would be correct.                                                                                     
REPRESENTATIVE SEATON  clarified that he is  trying to understand                                                               
how  "we"  get  the  most  qualified people  in  the  jobs  if  a                                                               
restriction  exists [to  hire less  expensive  employees to  fill                                                               
higher paid positions].                                                                                                         
Number 2264                                                                                                                     
MR. HILYARD responded that he was  not aware that there was "that                                                               
specific  limitation in  place," nor  was he  aware that  "such a                                                               
limitation would be  included in this bill."  He  said he has not                                                               
been counseled  by school administrators, for  example, that that                                                               
is  a concern.    He  indicated that  the  language  of the  bill                                                               
regarding authorization  states that the employer  may extend the                                                               
program,  but need  not extend  it to  everybody.   Therefore, he                                                               
explained,  if the  concern previously  stated by  Representative                                                               
Seaton is shared by a school district,  it may opt not to "do the                                                               
program."    Mr. Hilyard  stated  that  once a  school  district,                                                               
municipality, or state agency puts  forward a plan for retirement                                                               
incentive,    the   commissioner    of   [the    Department   of]                                                               
Administration has to "sign off on it."                                                                                         
REPRESENTATIVE  BERKOWITZ   stated  he  is  concerned   that  the                                                               
language  gives the  employer too  much  discretion to  determine                                                               
which employees might receive the  benefit.  He asked Mr. Hilyard                                                               
if  he  has  done  an  equal protection  analysis.    He  opined,                                                               
"Equally  situated  people  in  this  state,  who  are  eligible,                                                               
deserve access to the same legal rights and protections."                                                                       
MR. HILYARD  replied that  an equal  protection analysis  has not                                                               
been done.   He  said that,  during the  process of  drafting the                                                               
bill and its CS [Version H]  now before the committee, "there was                                                               
no concern,  particularly on the  part of [Legislative  Legal and                                                               
Research Services]  about the accessibility."   He  revealed that                                                               
[the sponsor]  has been  in close contact  with the  Alaska State                                                               
Employees  Association (ASEA)  while  working on  this bill,  and                                                               
"that concern  has been  expressed."  He  said the  sponsor would                                                               
not  oppose correcting  the language,  and he  suggested that  it                                                               
would be up to the committee to make that decision.                                                                             
Number 2456                                                                                                                     
LUKE HOPKINS told  the committee that he is a  member of PERS who                                                               
has been employed  by the University of Alaska for  30 years, and                                                               
he stated  that he is testifying  on behalf of himself.   He said                                                               
that,  in  his years  with  the  University,  he has  seen  other                                                               
retirement incentive  programs (RIPs) have positive  outcomes for                                                               
employees  and employers.   In  his area  of work,  he noted,  it                                                               
appears that  the changes that  the RIP  allowed to occur  in the                                                               
labor pool acted not only as  a savings in labor, but in allowing                                                               
entry-level positions  to be  advertised and  filled.   He added,                                                               
"We were able to have a few more employees in that area."                                                                       
MR.  HOPKINS  asked  the  committee  to support  the  bill.    He                                                               
posited,  "It  could  be  a   budget  tool  used  both  in  state                                                               
departments  and local  entities."   He stated  his understanding                                                               
that past [RIP] actions have reduced operational budget costs.                                                                  
Number 2590                                                                                                                     
BARBARA HUFF  TUCKNESS, Lobbyist for Teamsters  Local 959, stated                                                               
that  that group  supports  HB 329.   She  said  that, while  the                                                               
majority of  Teamsters Local 959  "rank and file  members" around                                                               
the state are actually private  sector employees, Teamsters Local                                                               
959 does  represent public  sector employees  within the  City of                                                               
Anchorage.   She  surmised that  at  least two  of the  committee                                                               
members is  familiar with the  $31-plus million  budget shortfall                                                               
that Anchorage  is dealing with.   She stated that  the Teamsters                                                               
Local 959  believes that [HB  329] is  a tool and  an opportunity                                                               
for individuals  to retire  early from  municipal jobs  and allow                                                               
employers to bring  in new employees at a lower  pay than someone                                                               
who has been working for the city  for 25 years.  She added, "Not                                                               
many  within the  municipality have  participated  under the  old                                                               
bill, because it  was found ... not to be  cost effective in many                                                               
of the areas."                                                                                                                  
MS. HUFF TUCKNESS,  in response to a request  by Chair Weyhrauch,                                                               
clarified that there was  a RIP in place about 4  or 5 years ago,                                                               
and that was what she previously referenced.                                                                                    
REPRESENTATIVE  SEATON asked  why the  old program  was not  cost                                                               
MS.  HUFF TUCKNESS  responded, "There  were certain  requirements                                                               
that had  to be  met, as  far as  the actuary  costs to  the plan                                                               
itself, and then looking at the  positions."  She said she thinks                                                               
in some areas  it was found to  cost the employee too  much.  For                                                               
example, she said that for employees  in the City of Anchorage to                                                               
participate costs between  $40-50,000.  She said,  "When you take                                                               
that three-year  period of  time and you  do a  cost calculation,                                                               
for  some folks  it actually  may be  worth paying  that kind  of                                                               
money.  For others - they  didn't feel that it was cost-effective                                                               
for them to do it."                                                                                                             
REPRESENTATIVE GRUENBERG  noted that the impact  is threefold and                                                               
affects the employee, the employer, and  the fund.  He stated his                                                               
concern is in regard to the latter.                                                                                             
Number 2783                                                                                                                     
RON   RUCKER,   President,  Classified   Employees   Association,                                                               
Matanuska-Susitna (Mat-Su) School  District, testified in support                                                               
of HB 329.  He stated  that his true purpose for participating is                                                               
to  support the  upcoming testimony  from Bob  Doyle, who  is the                                                               
district's chief school administrator.                                                                                          
Number 2833                                                                                                                     
REPRESENTATIVE  SEATON asked  Mr. Rucker  to explain  how HB  329                                                               
saves money "over the elimination of those positions."                                                                          
MR. RUCKER replied  that that's a good question that  he does not                                                               
know  if he  can  answer.   He  offered  the  perspective of  the                                                               
employees as follows:                                                                                                           
     If the district, because of  the high cost of long-term                                                                    
     employees, has to terminate  those employees, then, for                                                                    
     instance, custodians  who two  years ago  were cleaning                                                                    
     25,000  square  feet of  building  each  night are  now                                                                    
     cleaning 35,000.   Through  a termination  process, the                                                                    
     few ones  who remain  will be  probably cleaning  45 or                                                                    
     50,000 square feet.                                                                                                        
MR. RUCKER said that if  the higher-cost employees are allowed to                                                               
retire, then the  district may be able to  [hire] some lower-cost                                                               
employees  and  keep  that  workload down.    He  described  [the                                                               
current  situation]  as  a  spiraling   trend  down,  where  each                                                               
employee is being required to do  more and more.  Classroom sizes                                                               
are increasing and  the amount of work that each  employee has to                                                               
do to keep  the system running is increasing.   He indicated that                                                               
getting  higher-cost  employees off  the  payroll  in a  positive                                                               
manner, both for  the employee and the employer,  would allow the                                                               
employer to hire some positions  back and decrease overall costs,                                                               
while still maintaining a reasonable number of employees.                                                                       
Number 2920                                                                                                                     
ROBERT  DOYLE,  Chief   School  Administrator,  Matanuska-Susitna                                                               
(Mat-Su)  Borough  School District,  testified  on  behalf of  an                                                               
excess of  1,500 employees and  14,000 students in support  of HB
329,  Version H.   He  revealed that  he has  been in  the school                                                               
district for  the last 22 years,  and he stated that  he is aware                                                               
of the cost  savings from the last two state  RIPs.  He indicated                                                               
[his district]  has not [offered]  local RIPs like  the Anchorage                                                               
School  District has,  but said  there will  be discussion  about                                                               
"those kinds of things."  He offered an example.                                                                                
TAPE 04-09, SIDE B                                                                                                            
Number 2977                                                                                                                     
MR. DOYLE said,  "We have seen long-term savings."   For example,                                                               
by retiring  a teacher  who is  being paid  $60,000 or  more, and                                                               
hiring a  teacher at  $35,000 to $40,000,  the number  of layoffs                                                               
will be reduced.   He indicated that it would  be possible to try                                                               
to mitigate  the class size, and  he said there are  benefits for                                                               
the children, as well as the employees.                                                                                         
MR. DOYLE  said "we" believe  in giving school boards  the option                                                               
to participate [in  the RIP].  In the past,  he indicated, a cost                                                               
savings  [analysis]  has  always  been [required]  that  shows  a                                                               
savings calculated over three to five years.                                                                                    
Number 2900                                                                                                                     
CHAIR  WEYHRAUCH  asked  Mr.  Doyle  to  provide  a  quantitative                                                               
analysis of  how HB 329 would  be applied and what  it's economic                                                               
impact would  be to  his district,  as well as  "how it  would be                                                               
used  to  benefit  students,  teachers,  the  district,  and  the                                                               
MR.  DOYLE noted  that  [the school  district]  has submitted  in                                                               
writing what it  thinks is important to consider:   40 percent of                                                               
its employees are eligible for  such a retirement program and its                                                               
current  salary  and benefits  cost  are  at  90 percent  of  its                                                               
budget.   He noted that  because [choosing  to RIP] is  an option                                                               
for employees,  the district will  be making its  calculations of                                                               
what money  will be saved,  based on  [an estimation of  how many                                                               
employees will choose the RIP],  and then calculate that in terms                                                               
of "what it could possibly offset in budget cuts."                                                                              
Number 2844                                                                                                                     
REPRESENTATIVE  SEATON  revealed that  he  has  been involved  in                                                               
teacher hiring policies  in the past.  He noted  that the teacher                                                               
selection process has always been  focused on the best qualified,                                                               
which  is often  those teachers  with  the most  experience.   He                                                               
questioned, "Are we putting into  place a system that lets people                                                               
know  that, if  you've got  much experience  as a  teacher, don't                                                               
apply to  the district, because  the purpose  of this is  to move                                                               
out  highly experienced  teachers  and bring  in  those ...  with                                                               
lesser experience?"                                                                                                             
Number 2785                                                                                                                     
MR. DOYLE said page 11 of  HB 329 addresses "the issues under 'no                                                               
child  left behind,'"  and [the  district] believes  that it  can                                                               
keep its highly qualified teachers.                                                                                             
Number 2727                                                                                                                     
REPRESENTATIVE HOLM noted that his  wife has been teaching in the                                                               
school district  for 27 years.   He asked  if it was  Mr. Doyle's                                                               
opinion that  the people that retire  would stay in the  area and                                                               
work  as  part-time teachers,  for  example,  and not  leave  the                                                               
state.  He posited, "If  you encourage ... the younger generation                                                               
..., you change  the capacity of school districts  because of the                                                               
discipline  changes that  have occurred  over the  last 30  or 40                                                               
years."   He  indicated that  the change  affects the  ability to                                                               
really  teach.     He   asked  Mr.  Doyle   to  explain,   as  an                                                               
administrator, what  he is trying  to accomplish.  He  stated his                                                               
concern is  that "we're  making a  tradeoff in  education quality                                                               
for economics."                                                                                                                 
Number 2593                                                                                                                     
MR.  DOYLE said  his wife  is teaching  a combination  second and                                                               
third grade  [class] of 28 students,  including disabled students                                                               
and  emotionally  and  behaviorally  disturbed  students,  "which                                                               
cause  big impacts."   He  stated the  board's goal  would be  to                                                               
lower  class  size, continue  its  strong  staff development  and                                                               
curriculum alignment  programs, and  continue the things  that it                                                               
knows will  improve student learning.   Regarding teachers coming                                                               
back to teach  after retiring, he noted, for  example, that those                                                               
teachers' health insurance is provided  by the retirement system;                                                               
therefore,  the  district does  not  have  to contribute  to  the                                                               
retirement  system, which  reduces 12  percent of  the cost.   He                                                               
emphasized that  the district's number  one goal is to  focus its                                                               
efforts  to  improve  student learning,  despite  economic  times                                                               
making that tougher.                                                                                                            
Number 2501                                                                                                                     
REPRESENTATIVE SEATON  said he  believes HB  211 was  passed last                                                               
year to  allow the teachers that  had been retired through  a RIP                                                               
to come back and  teach at an hourly [rate].   He asked Mr. Doyle                                                               
if he has  experienced any influx of teachers coming  back on the                                                               
hourly basis in his district.                                                                                                   
MR.  DOYLE estimated  that  there  have been  five  to  ten.   He                                                               
offered his understanding that the  expiration date on HB 211 may                                                               
be 2005.   He  said [HB  329] "extends that  window a  little bit                                                               
farther."   He noted  that his district  has not  participated in                                                               
any  big district-sponsored  retirement [programs],  as Anchorage                                                               
has done;  therefore, it  has not  had as  many retirees  as some                                                               
other districts.   He  stated that  his district  is particularly                                                               
concerned  about its  hard-to-fill  special education  positions,                                                               
which is where some of the retirees have come back to work.                                                                     
Number 2421                                                                                                                     
MIKE CHMIELEWSKI,  President, Matanuska-Susitna  (Mat-Su) Borough                                                               
School  Board, offered  two  points:   First,  he underlined  the                                                               
school board's  support for HB  329 and for "everything  that Mr.                                                               
Doyle has  testified to."   He  said the  board is  interested to                                                               
have  [the  RIP]  option  available;  [that  option]  becomes  an                                                               
important tool in  facing upcoming budget decisions.   Second, he                                                               
revealed that  he had retired under  the RIP in 1999.   He stated                                                               
that he is  aware of the process  a number of people  made at the                                                               
time to  make the decision [whether  to retire under the  RIP, or                                                               
not].   He offered his  understanding that not  everyone eligible                                                               
to  retire did,  but many  did, which  benefited the  district at                                                               
that time.   In  the last  four years,  he noted,  he has  seen a                                                               
number of  people who retired return  to employment, particularly                                                               
to areas  such as special  education - a hard  to fill area.   He                                                               
stated  that  he  is  aware  of  individuals  who  are  currently                                                               
contemplating retirement.                                                                                                       
MR. CHMIELEWSKI  stated that  when there are  over 40  percent of                                                               
certified teachers  at the top  of the scale, what's  revealed is                                                               
that there is  a "bulge."  He  added, "And anything we  can do to                                                               
help flatten  that out so that  we have a more  normal population                                                               
of certified staffing  is going to be helpful."   Mr. Chmielewski                                                               
said his experience  suggests that having a  balanced spectrum of                                                               
people is particularly important.                                                                                               
Number 2291                                                                                                                     
REPRESENTATIVE SEATON  asked Mr. Chmielewski how  important "this                                                               
targeted offer" is versus a blanket extension to everyone.                                                                      
MR.  CHMIELEWSKI answered  that the  board is  particularly aware                                                               
that  individuals will  make this  choice, and  it would  like to                                                               
make the  choice available  to as  many people  as possible.   He                                                               
said,  "I don't  think we're  contemplating a  highly restrictive                                                               
targeting of this incentive."                                                                                                   
REPRESENTATIVE SEATON  referred to  the language  in the  bill on                                                               
page 2, line 10, which read as follows:                                                                                         
               (3) in specific geographic locations; or                                                                         
REPRESENTATIVE SEATON  asked Mr.  Chmielewski if  he is  "just as                                                               
happy with this as if it is a blanket offering to everyone."                                                                    
MR. CHMIELEWSKI answered yes.                                                                                                   
Number 2197                                                                                                                     
REPRESENTATIVE  HOLM asked  Mr.  Chmielewski if  he thinks  there                                                               
will be administrative  pressure to force people to  retire at 20                                                               
MR. CHMIELEWSKI  answered no.  He  said he saw no  signs of [that                                                               
kind of  pressure] in 1999  and he sees  no benefit to  be gained                                                               
[by it].                                                                                                                        
Number 2168                                                                                                                     
REPRESENTATIVE  SEATON  asked  Mr.  Chmielewski  to  explain  the                                                               
purpose of the incentive.  He clarified as follows:                                                                             
     If you have  a large number of people  who are eligible                                                                    
     to retire right now - and  if they retire they can come                                                                    
     back and  participate on hourly  basis ... -  would you                                                                    
     explain  to  me  the  benefit  of  this  RIP  and  how,                                                                    
     monetarily,  it   helps  both  the  district   and  the                                                                    
     individual,  if they're  already eligible  for retiring                                                                    
MR. CHMIELEWSKI  answered that the  benefit to the  individual is                                                               
the ability to retire and, if  they choose, [come back and work].                                                               
He gave an  example.  He said it allows  a person the flexibility                                                               
to work  within the parameters of  his/her life.  In  many cases,                                                               
he noted,  people have  found that  they have  enjoyed continuing                                                               
work and they are adding to their retirement money.                                                                             
Number 2059                                                                                                                     
REPRESENTATIVE SEATON  clarified that  he wants  to know,  if the                                                               
teachers are  already qualified to  retire, what benefit  would a                                                               
RIP be to them and to the district?                                                                                             
MR.  CHMIELEWSKI  noted  that  at  the  present  time  there  are                                                               
approximately  30  people  planning  to  retire  [in  the  Mat-Su                                                               
district],  and he  said he  knows of  others who  have expressed                                                               
interest in retiring  if there were more incentive to  do so.  He                                                               
deferred the question to Mr. Doyle.                                                                                             
MR. DOYLE said  it would not make a difference  to those ready to                                                               
retire under the 20-year or  30-year retirement.  He added, "They                                                               
could, under  this bill, get  an additional three years;  if they                                                               
paid  their  share and  the  district  pays  a share,  you  could                                                               
actually  improve that  a  little  bit for  an  individual."   He                                                               
stated that he  thinks the issue for the school  district is "the                                                               
volume."    He  said, "We  have  27  now;  I  have 400  that  are                                                               
eligible."   He noted that  the savings can be  significant, even                                                               
if 100  of those take  advantage to the RIP.   He added  that the                                                               
numbers are very similar to  [the borough's] classified ranks, as                                                               
well.   He  concluded that  a person  should consider  retirement                                                               
when financially and socially ready to do so.                                                                                   
Number 1897                                                                                                                     
FATE   PUTMAN,   Lobbyist   for  the   Alaska   State   Employees                                                               
Association/American Federation  of State, County,  and Municipal                                                               
Employees (ASEA/AFSCME) Local 52, told  the committee that it has                                                               
been a pleasure for [ASEA/AFSCME] to  work with the sponsor of HB
329 to  come up with [Version  H].  He stated  that [ASEA/AFSCME]                                                               
represents the general government  unit of state employees, which                                                               
is "the rank  and file of state employees" and  makes up the bulk                                                               
of the state employee union.                                                                                                    
MR. PUTMAN  explained that [ASEA/AFSCME]  is attempting to  get a                                                               
management tool to  the administration so it can,  if it chooses,                                                               
downsize  government  [by offering]  retirement  at  27 years  to                                                               
senior employees on  a 30-year [retirement].  He  also noted that                                                               
[ASEA/AFSCME]   also   represents   employees  in   the   20-year                                                               
retirement  system,   and  those   employees  could   be  offered                                                               
retirement at 17 years.                                                                                                         
MR.  PUTMAN suggested  the  committee consider  a  change to  the                                                               
language as follows:                                                                                                            
     Page 2, line 5                                                                                                             
     Between "employer" and "extend"                                                                                            
     Delete "need not"                                                                                                          
     Insert "should"                                                                                                            
MR. PUTMAN noted  that [ASEA/AFSCME] is also  concerned about the                                                               
language  on page  2, line  10  [text previously  provided].   He                                                               
stated that [ASEA/AFSCME] has found  that it is difficult to find                                                               
employees to  go out  to rural  Alaska [to  work].   He explained                                                               
that  [ASEA/AFSCME] is  concerned that  the RIP  will be  offered                                                               
only to  people who live  in urban  Alaska, and that,  because of                                                               
the difficulty in finding employees  to work in rural Alaska, the                                                               
administration won't offer the RIP  to social workers who live in                                                               
Bethel, for example.  Ideally,  he said, [ASEA/AFSCME] would like                                                               
to  see  the  RIP made  available  to  anyone  who  is a  Tier  I                                                               
employee.     Notwithstanding  that,  it  understands   that  the                                                               
administration   needs  the   flexibility  [in   the  areas   of]                                                               
bargaining  units,  job   [classifications],  and  administrative                                                               
components  [listed  in  Section  2,  paragraphs  (1)  and  (2)];                                                               
however, it would like to  see [Section 2, paragraph (3)] removed                                                               
from the legislation.                                                                                                           
Number 1746                                                                                                                     
MR.  PUTMAN  noted  that  the contribution  rate  for  a  30-year                                                               
employee is  three times  his/her contribution  to PERS,  while a                                                               
state employee  in a 30-year  system contributes 6.75  percent of                                                               
his/her salary  towards PERS  annually, making  that contribution                                                               
rate  20.25  percent.   He  added  that "the  20-year  employees"                                                               
contribute  7.5  percent.    Regarding  a  previous  question  by                                                               
Representative  Gruenberg  about  the  PERS  system,  Mr.  Putman                                                               
stated the following:                                                                                                           
     The contribution  rate about  eight years ago  from the                                                                    
     state to the  PERS system used to be  about 12 percent.                                                                    
     The stock  market was doing  well, so they  reduced the                                                                    
     employer  contribution  rate  down  to as  low  as  3.5                                                                    
     percent.  And because of  the crash in the stock market                                                                    
     and  the increase  in health  insurance premium  costs,                                                                    
     the PERS account is short money this year.                                                                                 
     ... It is not the  employee who caused the problem; the                                                                    
     employee's rate  has always stayed the  same, and we've                                                                    
     actually  continued to  pay the  same amount  of money.                                                                    
     But if you  will recall, about six years  ago, the PERS                                                                    
     board voted to return money to  the state - ... I think                                                                    
     it was in  the tune of about $12 million  ... - for use                                                                    
     of other purposes, because they  didn't need the money.                                                                    
     So, that  situation has  reversed dramatically,  and we                                                                    
     find  ourselves in  a situation  where  PERS does  need                                                                    
     money in order to be actuarially sound.                                                                                    
Number 1637                                                                                                                     
REPRESENTATIVE GRUENBERG  questioned whether  there should  be an                                                               
amendment to  the PERS  statute that  would prohibit  the pension                                                               
fund -  really a trust  fund - from  "just turning money  over to                                                               
the state."   Perhaps  a loan [could  be considered],  he opined,                                                               
but there should be "a fiduciary  duty there."  He stated that he                                                               
wants to ensure that the same thing cannot happen again.                                                                        
MR. PUTMAN offered his understanding  that about 15 years ago the                                                               
PERS board  did not exist  and the administration  controlled the                                                               
contribution.    A senator  put  in  a bill  to  change  it to  a                                                               
citizens' PERS  board, elected  by the  members who  benefit from                                                               
REPRESENTATIVE GRUENBERG remarked that  he was in the legislature                                                               
when this took place and  he doesn't think anyone envisioned what                                                               
would  happen  at the  time.    He  stated, "Sometimes  it's  not                                                               
popular to protect  a trust."  He added that  he is "looking also                                                               
at the permanent fund here."   He asked Mr. Putman and the "folks                                                               
on line, too"  to "look at this."   He said, "It's  a question of                                                               
timing, to  a large extent,  whether we  can afford the  draws on                                                               
these funds now if it's going to  bust the bank [in] the next few                                                               
Number 1487                                                                                                                     
REPRESENTATIVE   SEATON  referred   to   Mr.  Putman's   previous                                                               
recommendation  to eliminate  the language  on page  2, line  10,                                                               
because of a concern that [the  RIP] will not be offered in areas                                                               
where it  is difficult  to fill  employment.   He said,  "If this                                                               
language is  taken out,  you see a  potential for  getting people                                                               
out of  the very  jobs we are  having a hard  time filling."   He                                                               
offered an  example.   He asked, "Doesn't'  this run  contrary to                                                               
serving  the  best  interest  of  the  state  to  eliminate  that                                                               
geographic distinction?"                                                                                                        
MR. PUTMAN  replied that  he understands  Representative Seaton's                                                               
logic and  agrees with him that  there are times when  it is hard                                                               
to  find  [employees for  rural  jobs].    However, as  a  public                                                               
employee union,  [ASEA/AFSCME] wants all employees  to be treated                                                               
equally across the  board, regardless of where they  happen to be                                                               
working.    He  said  it  would fall  to  the  administration  to                                                               
determine if  it's feasible to offer  a RIP to "that  job class."                                                               
He asked,  for example, "Is it  fair to treat a  social worker in                                                               
Anchorage [differently  from] a social worker  in Bethel, because                                                               
that social worker  has chosen to take the Bethel  job?"  He said                                                               
that from the perspective of [ASEA/AFSCME], it isn't [fair].                                                                    
Number 1300                                                                                                                     
REPRESENTATIVE SEATON stated it seems  that what is wanted is [to                                                               
offer]  retirement at  17 years  instead of  20 and  at 27  years                                                               
instead of 30.  He asked if  it would accomplish the same goal if                                                               
[the legislature] just changed the  retirement [in statute] to 17                                                               
and 27 years, respectively.                                                                                                     
Number 1264                                                                                                                     
MR. PUTMAN offered  his understanding that "you  can't change the                                                               
retirement age."   He said  he believes the  administration can't                                                               
change a  contract that  was made  with an  employee at  the time                                                               
that employee was originally hired.                                                                                             
REPRESENTATIVE SEATON noted that  there are currently bills under                                                               
consideration to  [change the retirement] for  fire fighters, for                                                               
example;  therefore,   he  asked   again  whether   Mr.  Putnam's                                                               
organization  thinks that  adjusting  the  retirement time  would                                                               
accomplish the same task as offering the RIP.                                                                                   
MR. PUTMAN  answered, "I believe,  under that scenario,  it would                                                               
Number 1160                                                                                                                     
CHAIR  WEYHRAUCH  said  that   leaving  the  specific  geographic                                                               
location   language   in   the    bill   wouldn't   prevent   the                                                               
administration  from making  a  determination  on a  case-by-case                                                               
basis regarding where it will apply [the RIP].                                                                                  
MR. PUTMAN responded that is correct.                                                                                           
CHAIR WEYHRAUCH asked  what the benefit of  deleting the language                                                               
would be, in terms of adding more options.                                                                                      
MR.  PUTMAN   noted  that  during   the  last  RIP,   [the  early                                                               
retirement] was  not offered in areas  of rural Alaska.   He said                                                               
members [of  ASEA/AFSCME] brought  concerns regarding  this issue                                                               
to him.  He reiterated that  [ASEA/AFSCME] wants to see [the RIP]                                                               
offered universally.                                                                                                            
Number 1100                                                                                                                     
REPRESENTATIVE  GRUENBERG  emphasized  that he  wants  to  "think                                                               
about that  amendment."  He commented  that he holds some  of the                                                               
same concerns.   He said,  "We have a duty  to the people  of the                                                               
state who are served by the public employees, also."                                                                            
MR.  PUTMAN responded  that  [ASEA/AFSCME]  understands that  and                                                               
also understands that the House  State Affairs Standing Committee                                                               
is the committee that decides  policy regarding how to administer                                                               
"such things as this RIP."  He said  it is up to the committee to                                                               
decide if  an amendment  [regarding the deletion  of line  10, on                                                               
page  2] is  something it  wants to  [adopt].   He added,  "And I                                                               
believe that the sponsor is neutral on it."                                                                                     
Number 1000                                                                                                                     
JEFF  BARNHART,  testifying  on   behalf  of  himself,  told  the                                                               
committee that he works for the  Alaska Department of Fish & Game                                                               
(ADF&G) in Kodiak,  Alaska.  He opined that HB  329 is a positive                                                               
bill, because it  allows for the downsizing  of state government,                                                               
without putting  people in  the unemployment line.   At  the same                                                               
time,  he   said,  the  proposed  legislation   would  provide  a                                                               
considerable cost savings  to the state.  Senior  employees at or                                                               
near retirement  would be  given an incentive  to retire.   "Less                                                               
senior" employees who  would have normally been  laid off through                                                               
downsizing would  be given an  opportunity to retain  their jobs,                                                               
he noted.                                                                                                                       
MR. BARNHART  stated his  point of  view is  that the  bill would                                                               
have  a positive  economic impact  on local  communities and  the                                                               
state as  a whole, because "now  we have those retiree  dollars -                                                               
as well as the dollars from  the state employees who were able to                                                               
retain  their jobs  -  circulating through  our  local and  state                                                               
MR.  BARNHART turned  to  the "subjective  language"  on page  2,                                                               
lines 4-12.   He stated  that he certainly  would be in  favor of                                                               
offering [the RIP]  to all employees who would qualify.   He told                                                               
the committee  that the last  time a  RIP was offered  in Kodiak,                                                               
there were  three people in  the ADF&G in Kodiak  that qualified.                                                               
He posited  that the more people  who take advantage of  [a RIP],                                                               
the bigger the positive impact made to reduce the budget.                                                                       
Number 0763                                                                                                                     
CHAIR WEYHRAUCH remarked that there  is concern among a number of                                                               
fishing organizations that  ADF&G can no longer  compete with the                                                               
National Marine Fisheries Service  and the federal government for                                                               
salaries and  benefits.   The question has  been posed,  he said,                                                               
regarding what can  be done to keep highly  qualified and skilled                                                               
employees  with   ADF&G  to  continue   to  manage   the  state's                                                               
fisheries,  because "they  seem to  be bleeding  over now  to the                                                               
federal government, and  we're losing that expertise."   He asked                                                               
Mr. Barnhart how [HB 329] would address that issue.                                                                             
Number 0692                                                                                                                     
MR.  BARNHART  confirmed  that,   over  the  years,  the  federal                                                               
government has paid  more than the state; therefore,  a number of                                                               
employees  have  shifted  from  state to  federal  service.    He                                                               
reiterated that those  who are not senior employees  would be the                                                               
first to go  [due to layoffs], while the more  senior people with                                                               
the expertise  would remain.   If those  senior people  choose to                                                               
retire  in the  next year  or two,  that expertise  will be  lost                                                               
anyhow, and  the junior folks  will be lost  due to layoffs.   He                                                               
said that would mean, "then we've really lost."                                                                                 
Number 0522                                                                                                                     
JACK KREINHEDER,  Chief Analyst,  Office of the  Director, Office                                                               
of  Management  &  Budget,  Office  of  the  Governor,  told  the                                                               
committee  that the  fiscal note  is an  indeterminate one  for a                                                               
number of reasons that are stated  in the analysis.  He said that                                                               
program is  flexible and  confirmed that  it would  be up  to the                                                               
administration   and   individual  commissioners   whether   they                                                               
participate; therefore, it  is not possible to  forecast how many                                                               
people would retire under the  program and what the savings would                                                               
Number 0463                                                                                                                     
CHAIR  WEYHRAUCH asked  if this  bill  is an  important tool  for                                                               
managers of state employees to have  in order to make budgets and                                                               
address issues regarding employees.                                                                                             
MR.  KREINHEDER stated  his  preference would  be  to defer  that                                                               
question  to  the  Department of  Administration  and  to  answer                                                               
questions solely regarding the fiscal note.                                                                                     
Number 0379                                                                                                                     
     REPRESENTATIVE  SEATON  indicated   that  many  of  the                                                                    
     positions  that "we've  been  talking  about" are  ones                                                                    
     that will  be cut.   He mentioned an analysis  given on                                                                    
     savings [included  in the  committee packet],  which he                                                                    
     said is  based solely  on "replacing ...  each position                                                                    
     with a  B ... step."   He said  he is trying  to figure                                                                    
     out  whether  "that"  has  any  reality  to  "the  real                                                                    
     potential of the fiscal note."                                                                                             
REPRESENTATIVE  SEATON,   in  response  to  a   question  by  Mr.                                                               
Kreinheder,  confirmed   that  he  was  referring   to  materials                                                               
supplied by the sponsor.                                                                                                        
MR. KREINHEDER replied  that he cannot comment  directly on those                                                               
materials that he  does not have; however, to the  extent that he                                                               
understands  Representative Seaton's  question, he  surmised that                                                               
it sounds  like the savings  estimate that were  calculated based                                                               
on  refilling positions  at  a B  step,  rather than  eliminating                                                               
REPRESENTATIVE SEATON said that's correct.                                                                                      
MR.  KREINHEDER said,  given a  number  positions are  eliminated                                                               
rather  than be  refilled  at  a B  step,  the  savings would  be                                                               
considerably larger.   He  said he has  done research  looking at                                                               
other  states that  have  used RIPs  and,  not surprisingly,  the                                                               
biggest  savings are  where positions  can  be eliminated  rather                                                               
than refilled.                                                                                                                  
Number 0175                                                                                                                     
REPRESENTATIVE  SEATON clarified  that he  would like  to see  an                                                               
analysis  where  the  RIP  doesn't   cause  the  position  to  be                                                               
eliminated;  rather,  the  position  is going  to  be  eliminated                                                               
anyway.  He  said that in most  of the school districts  30 to 50                                                               
teachers are being eliminated, but  he is not seeing the analysis                                                               
to reflect "the actual circumstance that we're looking at."                                                                     
MR. KREINHEDER responded that the  savings are greatest by laying                                                               
people off,  rather than through a  RIP.  In a  RIP, the employer                                                               
has to contribute the full actuarial  cost.  The argument for the                                                               
RIP is  that it avoids layoffs  and people are allowed  to choose                                                               
to leave.                                                                                                                       
Number 0076                                                                                                                     
REPRESENTATIVE SEATON noted that  there are two considerations to                                                               
be made:  economic and  social.   He stated that  what he  is not                                                               
seeing  is an  actual  analysis of  the economic  considerations,                                                               
"with these  positions already scheduled  to be eliminated."   He                                                               
said he would like to see that in a fiscal note.                                                                                
The committee took a brief at-ease.                                                                                             
TAPE 04-10, SIDE A                                                                                                            
Number 0001                                                                                                                     
REPRESENTATIVE SEATON  said that  he would like  to see  a fiscal                                                               
note based  on the  probable scenario of  the elimination  of the                                                               
jobs  in  either  case  and  the  savings  or  cost  through  the                                                               
imposition of a RIP program versus without.                                                                                     
MR. KREINHEDER interjected that  he assumed Representative Seaton                                                               
was referring  to the State  of Alaska  as opposed to  the school                                                               
districts, because the state wouldn't  do a fiscal note on behalf                                                               
of the school districts.                                                                                                        
REPRESENTATIVE SEATON  said that  would be acceptable  because he                                                               
merely wanted to get to the analysis.                                                                                           
MR.  KREINHEDER  recalled  that the  governor's  2005  budget  is                                                               
looking at  eliminating 400 positions,  of which only  about one-                                                               
third are currently filled.   Therefore, there are 100-135 filled                                                               
positions  that could  potentially be  eliminated.   However, the                                                               
aforementioned  is subject  to some  caveats  such as  attrition.                                                               
Mr.  Kreinheder surmised  that  Representative  Seaton wanted  to                                                               
know the potential savings from  eliminating the filled positions                                                               
as opposed to those employees being offered a RIP.                                                                              
REPRESENTATIVE SEATON agreed  with Mr. Kreinheder's understanding                                                               
of what he was requesting.                                                                                                      
MR.  KREINHEDER  clarified that  it's  a  bit  of an  apples  and                                                               
oranges situation because a number  of the employees in those 130                                                               
positions  probably  aren't  eligible  to participate  in  a  RIP                                                               
because  they  are too  young  and  don't  have enough  years  of                                                               
REPRESENTATIVE SEATON  specified that  what is being  reviewed is                                                               
either  eliminating  positions  or  if   there  is  a  RIP,  then                                                               
positions will  be eliminated and  other [individuals]  will move                                                               
into them.                                                                                                                      
Number 0341                                                                                                                     
REPRESENTATIVE  GRUENBERG  summarized  [Representative  Seaton's]                                                               
question  as  follows:   "What  are  the impacts  of  eliminating                                                               
employee A versus employee B?"   The [aforementioned information]                                                               
will allow the legislature to  properly and logically analyze the                                                               
situation.  Representative Gruenberg  returned to viewing this as                                                               
a triangle in  which there is the state  employer, the employees,                                                               
and the pension fund.  He  asked if Mr. Kreinheder represents the                                                               
pension fund.                                                                                                                   
MR.  KREINHEDER answered  that he  doesn't work  for the  pension                                                               
boards, which  are administered  by the  respective PERS  and TRS                                                               
boards with  support from  the administration,  primarily through                                                               
the Division of Retirement & Benefits.                                                                                          
REPRESENTATIVE  GRUENBERG  requested  that  witnesses  who  could                                                               
advocate from  the [PERS  and TRS]  perspectives be  available to                                                               
the committee.                                                                                                                  
Number 0606                                                                                                                     
REPRESENTATIVE SEATON inquired  as to the effect  of changing the                                                               
[years of service  necessary for retirement] to 17  and 27 versus                                                               
a RIP.                                                                                                                          
MR. KREINHEDER  agreed that  the state  could legally  reduce the                                                               
number of years of service  for retirement.  However, the concern                                                               
is  that  doing a  RIP  every  so  many  years is  tantamount  to                                                               
reducing the years of service  for retirement and thus might even                                                               
encourage  employees  to delay  retirement  until  the next  RIP,                                                               
which would have the opposite impact  of the RIP.  With regard to                                                               
the  fiscal  impact   to  the  state,  any   enhancement  to  the                                                               
retirement system,  such as reducing  retirement age,  would cost                                                               
the state more unless the  employee contributions were increased.                                                               
However,  he  said  he  believes that  an  increase  in  employee                                                               
contributions could only be done for new employees.                                                                             
Number 0871                                                                                                                     
MELANIE MILLHORN, Director, Health  Benefits Section, Division of                                                               
Retirement & Benefits, Department  of Administration, in response                                                               
to  Chair  Weyhrauch,  confirmed that  the  division's  actuarial                                                               
consultant, Bob Reynolds,  who is going to do a  cost analysis on                                                               
HB 329, is a contractor.   She informed the committee that Mercer                                                               
Human  Resource  Consulting  has been  the  division's  actuarial                                                               
consultant for  approximately 12 years.   In further  response to                                                               
Chair  Weyhrauch,  Ms.  Millhorn   noted  that  Mr.  Reynolds  is                                                               
stationed out of Seattle, Washington.                                                                                           
MS.  MILLHORN related  to the  committee  that at  this time  the                                                               
division  has  a  neutral  position  as it  relates  to  HB  329.                                                               
However, the division contacted  Mercer Human Resource Consulting                                                               
last  week  and  requested  that   it  prepare  a  cost  analysis                                                               
associated with HB 329.   Mercer Human Resource Consulting hasn't                                                               
provided an  estimate with regard  to the completion of  the cost                                                               
CHAIR WEYHRAUCH expressed the need to  move on this matter due to                                                               
the  shortness  of  the  session   and  the  scrutiny  that  this                                                               
legislation will receive.                                                                                                       
Number 1045                                                                                                                     
REPRESENTATIVE  SEATON asked  if the  cost analysis  will discuss                                                               
the elimination of positions that he discussed earlier.                                                                         
MS.  MILLHORN  pointed  out  that  the  [consulting  firm]  would                                                               
identify the  pool of  individuals who are  available.   She said                                                               
she understood Representative Seaton  to be requesting additional                                                               
analysis  that  would  specifically review  the  elimination  [of                                                               
positions].    She  highlighted   that,  as  the  legislation  is                                                               
currently  written, it  allows  the employer  to  produce a  cost                                                               
savings in a number of different mechanisms.                                                                                    
CHAIR  WEYHRAUCH noted  that  the [committee]  has  a history  of                                                               
reviewing  RIP legislation,  and  therefore he  asked  if any  of                                                               
these sort of cost-benefit analysis has been done.                                                                              
MS.  MILLHORN said  that  she  has reviewed  one  of the  earlier                                                               
legislative  audits, which  includes  some  caveats that  specify                                                               
that although  the legislation had  cost savings  associated with                                                               
it, depending on the case the savings seemed a bit elusive.                                                                     
Number 1228                                                                                                                     
REPRESENTATIVE GRUENBERG  commented that  it would be  helpful to                                                               
see  the  legislative  audit  to  which  Ms.  Millhorn  referred.                                                               
Representative Gruenberg  requested that a session  be devoted to                                                               
this legislation and that perhaps  the House Special Committee on                                                               
Ways and Means be invited to participate.                                                                                       
[HB 329 was heard and held.]                                                                                                    

Document Name Date/Time Subjects