Legislature(2023 - 2024)BELTZ 105 (TSBldg)
02/08/2023 03:30 PM Senate EDUCATION
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SB 14-RIP FOR PUBLIC EMPLOYEES/TEACHERS 3:31:42 PM CHAIR TOBIN announced the consideration of SENATE BILL NO. 14 "An Act relating to reemployment of persons who retire under the teachers' retirement system as mentors; relating to retirement incentives for members of the defined benefit retirement plan of the teachers' retirement system and the defined benefit retirement plan of the Public Employees' Retirement System of Alaska; and providing for an effective date." 3:32:43 PM SENATOR SCOTT KAWASAKI, District D, Alaska State Legislature, Juneau, Alaska, provided the sponsor statement on SB 14 as follows: [Original punctuation provided.] "An Act relating to reemployment of persons who retire under the teachers' retirement system; relating to retirement incentives for members of the defined benefit retirement plan of the teachers' retirement system and the defined benefit retirement plan of the Public Employees' Retirement System of Alaska; and providing for an effective date." Senate Bill 14 would implement a temporary, voluntary Retirement Incentive Program to increase state savings by allowing public employees to retire up to three years early and to set in statute a way for a school district to rehire retired educators through a 12- month contract. Long-serving public employees are among the highest paid in the state. In many cases, pensions paid to retiring employees would cost the state less money than their current salaries. Providing high-salaried employees with the option to retire early would save Alaska money through lower personnel costs. SB 14 could also help prevent layoffs. The bill presents a method of cost-cutting and payroll reduction without forcing anyone out of the workforce before they are ready to retire. This gives the State of Alaska the opportunity to reduce operating costs by opening vacancies that enable the placement of more junior employees. Retirement incentive programs are regularly used in the private sector to efficiently control personnel costs through market incentives rather than heavy-handed layoffs. Retirement Incentive Programs have been used on a temporary basis three times in Alaska's history and was last proposed in 2004. In 1986, Senator Jim Duncan estimated savings at approximately $25 million. A Legislative Audit of the 1989 Retirement Incentive Program demonstrated a savings of $22.9 million with nearly 1,764 individual participants. In 1996, Rep. McGuire calculated the state gained $41 million in savings through identical legislation. Senate Bill 14 is an innovative policy option for state agencies, municipalities, and school districts to consider as a means to reduce payroll costs without layoffs. 3:37:18 PM JOE HAYES, Staff, Senator Scott Kawasaki, Alaska State Legislature, Juneau, Alaska, presented the sectional analysis on SB 14 as follows: [Original punctuation provided.] "An Act relating to reemployment of persons who retire under the teachers' retirement system; relating to retirement incentives for members of the defined benefit retirement plan of the teachers' retirement system and the defined benefit retirement plan of the Public Employees' Retirement System of Alaska; and providing for an effective date." Section 1: Defines the purpose and intent of the bill. Sec. 2 AS 14.20.136(a), Page 2, Lines 510 Is amended to update the statute under which members (individuals who are eligible to participate in the retirement plan and are covered by the plan) are retired from AS 14.25.110(a) to AS 14.25.110. Sec. 3 AS 14.20.136(f), Page 2, Lines 1117 Is amended by adding a new subsection AS 14.20.136(f)(2) to specify that (c), (d), and (e)(1) of this section do not apply to the rehire of a member who is paid by the hour to mentor teachers who have taught for fewer than four years. (c), (d), and (e)(1) require, in other circumstances, that the school district describe a shortage before rehiring retired members, publicly advertise the position, make contracts for no longer than 12 months, and provide the administrator with related documentation. Sec. 4 AS 14.25.043(f), Page 2, Lines 1827 Is amended to update the statute under which members are retired from AS 14.25.110(a) to AS 14.25.110. Sec. 5 AS 14.25.043(g), Page 2, Lines 2831, Page 3, Lines 14 Is amended to update the statute under which members retire to specify that this subsection, which allows for retired and reemployed members to receive group health plan coverage, does not apply to retired members who are rehired and paid by the hour to mentor teachers who have taught for fewer than four years. Sec. 6 AS 14.25.070(a), Page 3, Lines 713 Is amended to clarify that each employer shall contribute to the retirement system 12.56 percent of all base salaries paid to active and retired members who are eligible to receive group health plan coverage, which does not include retired members who are rehired and paid by the hour to mentor teachers. Section 7: Page 3- 6 Lines 15- 24 Defines who are eligible to use the retirement incentive program under the legislation. Employer's may limit the program to specific components, job classifications, geographic location, or a combination of the three. Section 8: Page 6 7 Lines 25 - 12 Requires interested eligible state employees must be employed for at least 12 months prior to application to an approved RIP. Prohibits executive branch employees from participating in a RIP. Section 9: Page 7, lines 15 21 Authorizes certain University of Alaska employees who are members of PERS or TRS may participate in a RIP under the appropriate requirements for their defined benefit retirement program established under this bill. Section 10: Page 7 8, Lines 25 2 Is amended to give specify benefit cannot be enacted under this bill until an agreement is executed with the administrator that authorizes the employee to participate in the RIP. Allows the legislature to change a RIP as it relates to employees for whom an agreement has not been executed. Section 11: Page 8, Lines 5 - 10 Is amended to add a new section which allows the commissioner to adopt regulations to implement and interpret the Act. Section 12: Page 8 - 9, Lines 13 - 12 Provides definitions of administrator, employer, OMB, PERS, TRS, public organization and state agency for purposes of the Act established under this bill. Section 13 Sec. 18: Pages 812 Is amended to update referenced section numbers. Sec. 19 Page 12, Lines 1516 Is Amended to say Sections 1 18 of the acts applies to contracts entered on or after the effective date of the legislation. Sec. 20 Page 12, Line 17 Is amended to specify that the only sections 1 and 717 are repealed on July 1, 2026. The teacher mentoring provisions remain in effect. Sec. 21 Page 12, Line 18 Provides an immediate effective date under AS 01.10.070(c). 3:41:52 PM CHAIR TOBIN noted Senator Shower was in attendance. 3:42:00 PM SENATOR GRAY-JACKSON asked if municipal employees would be eligible. 3:42:15 PM MR. HAYES replied that public sector employees would be eligible for the program. 3:42:31 PM SENATOR STEVENS opined that it is concerning to replace senior professors with inexperienced hires. He asked whether the goal of SB 14 is to save money or get the best teachers. MR. HAYES replied that the governor had implemented budgets forcing organizations to terminate employees. Generally, new employees were the individuals let go. SB 14 offers agencies another tool in their toolbox by allowing employees close to retirement an opportunity to retire early, allowing newer employees to remain. No agency would have to apply the incentives in SB 14. 3:44:03 PM SENATOR STEVENS asked if SB 14 allows older teachers to retire early and return to teaching. MR. HAYES said that the Department of Labor and Commerce chairperson added the provision last year to incentivize teachers to mentor new teachers. Senator Kawasaki decided to leave the provision in SB 14. 3:44:51 PM SENATOR GRAY-JACKSON asked how the retirement provision would address the retirement age of various tiers. MR. HAYES said every tier has the ability for early retirement if the employee can pay the percentage required. SB 14 requires an employee to be at least 50 years old, with at least 17 years of service. 3:46:00 PM SENATOR KIEHL stated a clause in SB 14 allows the Personal Employee Retirement System and Teachers Retirement System (PERS and TRS) administrator to withdraw approval of retirement incentive pay (RIP) if it would actuarially harm the fund. He asked if it is also a requirement for approving RIP. MR. HAYES reiterated that SB 14 is just a tool. He replied that agencies must decide who can apply. For example, if an agency considers a deputy director too valuable to retire, that person would not be allowed to retire. However, a senior employee might be able to, provided the employee was outside the executive branch. 3:47:20 PM SENATOR KIEHL said the Division of Retirement and Benefits (DRB) approves RIPs for school districts. He asked how a DRB employee would know whether a school district could fill specific jobs. He opined that it would be difficult for the head of DRB to know the answers to the concerns of school districts, such as the reasonable chance of filling a position. 3:48:11 PM MR. HAYES replied that before it reaches the state level, the assumption is school districts, working with the school boards, would decide what positions could retire early. They would select the provisions necessary to hire someone to fill the position. Local government would make the decision and carry it forward. 3:48:54 PM SENATOR STEVENS asked how the University of Alaska and school districts have responded to SB 14. MR. HAYES replied that the University of Alaska had yet to respond, and school districts have had a mixed response. Although some school districts like having another tool in their toolbox, others fear needed teachers will retire. Yet, school districts control the retirement eligibility mechanism. He stated he continues explaining SB 14 to those districts that are uncertain. 3:50:02 PM DOUG WOOLIVER, Deputy Director, Office of the Administrative Director, Alaska Court System, Anchorage, Alaska, stated the court system offered a retirement incentive program in FY 17 as a money-saving tool. The agency did not have the authority to offer early retirement, which would require statutory change. Instead, it offered severance pay. If an employee worked for the court system for a minimum of 10 years and was eligible to retire for at least three years, the employee would receive three months of salary as an incentive to quit. There were 28 eligible employees, making it easy to determine whether valuable people would be lost. Fourteen people accepted the severance package. The agency knew it could easily fill some positions and not fill others. The first year was a saving of $680,000. The amount of savings decreased each year as employees' steps increased. It was a successful program used during tough budget years. 3:52:41 PM SENATOR KIEHL said he understood the reason for the ten-year service requirement but asked for an explanation of the three- year retirement eligibility requirement. MR. WOOLIVER replied that it was to encourage eligible people to retire. 3:53:37 PM SENATOR KIEHL responded that people could have been encouraged to retire one month after eligibility. He asked why the agency chose three years instead. MR. WOOLIVER replied he was unsure why the agency chose three years except that people eligible for three years had probably been considering retirement. Also, the agency looked at how years of retirement eligibility affected participation numbers to manage the loss of long-term employees. It is a balance between saving money and keeping experienced employees. 3:54:40 PM CHAIR TOBIN held SB 14 in committee.