Legislature(2009 - 2010)BELTZ 211

02/26/2009 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 23 REPEAL DEFINED CONTRIB RETIREMENT PLANS TELECONFERENCED
Moved CSSB 23(L&C) Out of Committee
+ HB 104 WORKERS COMP. MEDICAL TREATMENT FEES TELECONFERENCED
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 84 AIDEA: BONDING LIMITS; CONFIDENTIALITY
Moved CSSB 84(L&C) Out of Committee
         SB  23-REPEAL DEFINED CONTRIB RETIREMENT PLANS                                                                     
                                                                                                                                
CHAIR PASKVAN announced SB 23 to be up for consideration.                                                                       
                                                                                                                                
1:46:18 PM                                                                                                                    
SENATOR THOMAS moved to bring  CSSB 23(L&C), version 26-LS0172\P,                                                               
before  the  committee for  discussion  purposes.  There were  no                                                               
objections and it was so ordered.                                                                                               
                                                                                                                                
1:48:35 PM                                                                                                                    
SENATOR  ELTON, sponsor  of SB  23, explained  the CS  adopts the                                                               
approach   that  was   suggested  by   one  of   the  committee's                                                               
professional  testifiers,  Mr.  Michael  Lamb.  It  allows  those                                                               
potential employees who come into  the system and who already are                                                               
vested  in a  defined  benefit (DB)  system  exclusive of  social                                                               
security to  choose the existing  defined contribution  (DC) plan                                                               
that the state now has for everyone.                                                                                            
                                                                                                                                
SENATOR BUNDE  said it's his  understanding that someone  who has                                                               
worked in  the private sector  and qualifies for  social security                                                               
and then  comes to  work for  the state could  not choose  the DC                                                               
plan.                                                                                                                           
                                                                                                                                
SENATOR ELTON  answered no; he  was trying to suggest  if someone                                                               
came  with  a  DC  plan  and social  security,  that  the  social                                                               
security  would not  be defined  for  this purpose  as a  defined                                                               
benefit.                                                                                                                        
                                                                                                                                
JESSE  KIEHL, aide  to  Senator Elton,  said  the biggest  single                                                               
change in  the CS is  the repealer section  that got a  whole lot                                                               
shorter.  The  bulk of  the  statutes  that  would no  longer  be                                                               
deleted related to the DC retirement plan.                                                                                      
                                                                                                                                
1:50:35 PM                                                                                                                    
He said a  number of sections, 1,2,5,7, and 10  are technical and                                                               
clarify that  DB statutes do not  apply to anyone who  is already                                                               
in one of Alaska's DC retirement plans.                                                                                         
                                                                                                                                
1:51:22 PM                                                                                                                    
The more  substantive sections, sections  3 and 4,  are unchanged                                                               
from  the  original version;  they  repeal  the requirement  that                                                               
before a  DB payment  can be  fully inflation-adjusted  the funds                                                               
must be  105 percent funded.  They also shift  the responsibility                                                               
of making the  decision whether to grant  an inflation adjustment                                                               
from  a plan  administrator to  the Alaska  Retirement Management                                                               
Board, which has investment experts on it.                                                                                      
                                                                                                                                
Section 6 on  page 3 almost perfectly mirrors section  11 for the                                                               
TRS. It  governs which new hires  are permitted to choose  the DC                                                               
retirement plan. These are new  employees who are fully vested in                                                               
a DB system other than PERS  and TRS, like a military retiree. It                                                               
might help public  employers recruit new people.  The choice must                                                               
be made within 60 days.                                                                                                         
                                                                                                                                
The  only  other change  in  the  CS  is  found in  the  repealer                                                               
section,  section  12, on  page  7,  1ine  15, that  repeals  two                                                               
sections of session  law that are scheduled to go  into effect in                                                               
2010.  These   sections  would  have   provided  that   under  no                                                               
circumstance can  an employee who refunded  his contribution from                                                               
the DB system  and who returns to  work on or after  July 1, 2010                                                               
participate in a DB plan.                                                                                                       
                                                                                                                                
1:56:04 PM                                                                                                                    
SENATOR BUNDE asked  why they chose to exclude  those who receive                                                               
social security as qualifying for a DB.                                                                                         
                                                                                                                                
MR.  KIEHL  answered the  two  primary  thoughts underlying  that                                                               
decision  in  the  CS  were the  government  pension  offset  and                                                               
windfall  elimination provisions  that  dramatically reduce  what                                                               
social security  will pay someone  who has a DB  pension. Another                                                               
thought is  the availability of  DB health coverage  which social                                                               
security does not provide.                                                                                                      
                                                                                                                                
SENATOR  BUNDE disagreed  as  someone who  has  qualified to  get                                                               
social security;  it's not a  dramatic decrease in the  amount of                                                               
social security.                                                                                                                
                                                                                                                                
1:57:57 PM                                                                                                                    
CHAIR PASKVAN asked if this CS advances sound public policy.                                                                    
                                                                                                                                
SENATOR  ELTON responded  that the  changes  in the  CS "are  not                                                               
toxic to the bill," and it goes  "an awful long way" to solve the                                                               
recruitment/retention issues  they are beginning to  see with the                                                               
sole DC approach.                                                                                                               
                                                                                                                                
2:00:10 PM                                                                                                                    
SENATOR DAVIS asked what the department felt about the CS.                                                                      
                                                                                                                                
2:00:26 PM                                                                                                                    
KEVIN BROOKS,  Deputy Commissioner, Department  of Administration                                                               
(DOA),  thanked  the  committee  for  its  diligence  in  working                                                               
through this  bill, but  the administration had  not yet  taken a                                                               
position on it. Their  focus is on what the costs  will be and he                                                               
will brief the governor.                                                                                                        
                                                                                                                                
2:02:21 PM                                                                                                                    
MR.  BROOKS pointed  out  that actuarial  costs  are an  averaged                                                               
figure,  and  that  giving  new  employees  a  choice  creates  a                                                               
different dynamic  for the actuaries, because  certain age groups                                                               
will  pick one  plan over  the other,  something called  "adverse                                                               
selection."  The  normal costs  (the  cost  that is  required  to                                                               
contribute to accrue  enough money to pay an  earned benefit) for                                                               
a 25-year  old are small, but  for someone who is  older they are                                                               
higher. So  you end up  with a  result "that is  not one-to-one."                                                               
That  change will  take  more actuarial  review.  He also  needed                                                               
clarification on  what part  of the  plan was  closed on  July 1,                                                               
2010.                                                                                                                           
                                                                                                                                
2:05:10 PM                                                                                                                    
MR. BROOKS  also commented that retirement  systems, pensions and                                                               
health  care plans  are  very  complicated, and  you  have to  be                                                               
exceedingly  precise with  questions  to really  "tease out"  the                                                               
answer. He  heard some  mention that  Nebraska and  West Virginia                                                               
have gone back to a DB plan; but  he found that they did that for                                                               
the pension  only, not for  health care. So, as  they contemplate                                                               
these changes, he urged them to  be precise in the questions they                                                               
are asking and  the comparisons they are making.  He also assured                                                               
them  that  they  are  still   "looking  hard"  at  the  unfunded                                                               
liability and what impact there  might be on that. Some estimates                                                               
indicate it has grown to over $9 billion now.                                                                                   
                                                                                                                                
2:08:04 PM                                                                                                                    
He reported that  the recruitment and retention  issues have been                                                               
taken seriously,  and the governor  created a task  force through                                                               
Administrative Order  237 to look  at it. The  administration has                                                               
negotiated  responsible contracts  and  passed HB  417 last  year                                                               
that adjusted  pay for many  non-covered employees. So,  they are                                                               
looking at pay and alternate  work weeks. Data has indicated that                                                               
the new  tier has 7,200 new  employees. In the TRS  system out of                                                               
11,000 employees,  2,100 are  active in  the DC  plan. So,  in 32                                                               
months, 20  percent of active workers  are in the new  tiers. So,                                                               
data does not support that it's  now harder to hire people across                                                               
the board.                                                                                                                      
                                                                                                                                
The  demographics  of the  workforce  are  very interesting.  The                                                               
average for  PERS is 45 years  old with 10 years  of service; the                                                               
average  for TRS  is 45  years old  with just  under 12  years of                                                               
service. The State of Alaska as  an employer has an average of 45                                                               
year olds with 9 years of service.                                                                                              
                                                                                                                                
2:11:03 PM                                                                                                                    
SENATOR MEYER joined the committee.                                                                                             
                                                                                                                                
2:11:39 PM                                                                                                                    
SENATOR BUNDE asked if the fiscal note applies to CS.                                                                           
                                                                                                                                
MR. BROOKS replied no.                                                                                                          
                                                                                                                                
SENATOR BUNDE said  employer rates are capped at  22 percent, and                                                               
it is  likely that  the unfunded  liability for  school districts                                                               
and municipalities  will go up,  and that  will continue to  be a                                                               
state responsibility.                                                                                                           
                                                                                                                                
2:12:43 PM                                                                                                                    
MR. BROOKS said  that was accurate. Since the passage  of SB 125,                                                               
the state assumed  the liability for anything  over 12.56 percent                                                               
for TRS and 22 percent for  PERS. Last year's was a combined $400                                                               
million.                                                                                                                        
                                                                                                                                
2:13:31 PM                                                                                                                    
CHAIR PASKVAN asked if the  $16-million expenditure for 2012 is a                                                               
worst-case scenario when everyone elected into the DB system.                                                                   
                                                                                                                                
MR.  BROOKS replied  they made  the assumption  that all  members                                                               
would transfer into the DB system.                                                                                              
                                                                                                                                
CHAIR PASKVAN said  he was trying to recognize  that the document                                                               
references  a  4  percent  annual  wage  increase;  so  when  one                                                               
references the  $16 million  in 2012,  it's in  relation to  a $3                                                               
billion gross payroll.                                                                                                          
                                                                                                                                
2:15:17 PM                                                                                                                    
SENATOR BUNDE  asked Mr.  Brooks to  take a  message back  to the                                                               
commissioner  that  he  is  receiving  lots  of  emails  on  this                                                               
subject,  and some  of them  are  from state  employees on  state                                                               
computers.  It's inappropriate  to use  state resources  to lobby                                                               
state legislators.                                                                                                              
                                                                                                                                
MR. BROOKS said  this issue came up in the  last couple of weeks;                                                               
it  wasn't about  the use  of email,  but rather  about employees                                                               
testifying  on legislation.  The  administration encourages  that                                                               
right of civic  participation. But word has gone  out that people                                                               
do it  on their own  time and  that they identify  themselves and                                                               
who they are representing accurately.                                                                                           
                                                                                                                                
PAT  SHIER,  Director,  Division   of  Retirement  and  Benefits,                                                               
Department of  Administration (DOA), said on  the recruitment and                                                               
retention issue  that the division  looked at a  four-year period                                                               
of time with the  change from DB to DC right  in the middle. They                                                               
looked at all  the people who were brand new  public employees in                                                               
the PERS  system who came to  work during the prior  two years as                                                               
one  universe  and  in  the   other  universe  was  a  number  of                                                               
individuals  who came  to work  for public  service under  the DC                                                               
plan. To  date, more individuals that  came to work under  the DB                                                               
system  actually  refunded out  of  system,  took their  employee                                                               
contributions  and left  on a  percentage basis  than did  the DC                                                               
folks. To say  categorically that that's proof  positive that the                                                               
DC  system  is better  than  the  DB  can't be  asserted  without                                                               
talking to those people and getting more data.                                                                                  
                                                                                                                                
2:18:38 PM                                                                                                                    
SENATOR BUNDE  encouraged them to look  at studies of the  top 10                                                               
reasons  for people  leave teaching  - retirement  isn't on  that                                                               
list.                                                                                                                           
                                                                                                                                
2:19:06 PM                                                                                                                    
SENATOR MEYER  said it appears  the CS makes the  retirement plan                                                               
optional.  He's not  sure  the  DC plan  has  been  that bad  for                                                               
recruitment and retention. He asked if he supported the CS.                                                                     
                                                                                                                                
MR.  BROOKS said  he  had just  looked  at it  and  they need  an                                                               
actuarial  analysis. The  administration  has no  position on  it                                                               
now.                                                                                                                            
                                                                                                                                
2:21:17 PM                                                                                                                    
SENATOR THOMAS  remarked that the  DB plan was been  in existence                                                               
for a  long time; but  the DC plan  got adopted within  one month                                                               
after introduction.                                                                                                             
                                                                                                                                
MR. BROOKS  responded that the  implementation happened  one year                                                               
later.                                                                                                                          
                                                                                                                                
SENATOR  THOMAS said  he  was talking  about  the one-month  time                                                               
frame on  changing the  DB to the  DC plan was  all the  time the                                                               
issue was considered by the legislature.                                                                                        
                                                                                                                                
MR.  BROOKS  responded  that  the  actual  deliberation  on  that                                                               
legislation was far longer than that.                                                                                           
                                                                                                                                
SENATOR  THOMAS recalled  that he  asked people  who should  have                                                               
been in the know  at the time for statistics on  the tiers of the                                                               
plan, specifically  on Tier  III PERS  and Tier  II TRS,  and the                                                               
information was not  available. A fair amount  of supposition was                                                               
used  and there  was a  bad financial  situation at  the time  as                                                               
well.                                                                                                                           
                                                                                                                                
2:24:40 PM                                                                                                                    
SENATOR  ELTON remarked  that Mr.  Kiehl  was at  a noon  meeting                                                               
today  that  got  straight  to   a  couple  of  the  department's                                                               
assumptions about unfunded liability  that could lower the fiscal                                                               
note by $15  million. In another the assumptions made  on the TRS                                                               
costs, could be  a $13 million/year. So he was  surprised to hear                                                               
they had  a fiscal note,  because his understanding is  that they                                                               
were going to rework it.                                                                                                        
                                                                                                                                
He also  wanted "to vent just  a little bit" that  he shared this                                                               
bill as  a prefile  with the department,  and now  this committee                                                               
has  gone  through three  hearings  and  has heard  an  extensive                                                               
amount of public testimony. He  assumed the department would have                                                               
a fiscal  note they were  comfortable with  by now; and  now they                                                               
are saying  they have  to review their  assumptions. "I  can tell                                                               
you as a  person who was here  in 2005, it didn't  take them that                                                               
long to  do a fiscal note  for defined contribution and  that was                                                               
without an awful  lot of the data.  And that was back  when - and                                                               
I'm  going to  repeat some  words that  I heard  in the  previous                                                               
testimony -  before we even  knew what kind of  precise questions                                                               
to ask."                                                                                                                        
                                                                                                                                
CHAIR PASKVAN  said they might  be able to  move the bill  with a                                                               
forthcoming fiscal note.                                                                                                        
                                                                                                                                
2:27:52 PM                                                                                                                    
SENATOR ELTON said the forthcoming  fiscal note might not address                                                               
some costs. The training costs  are important, and he agreed with                                                               
previous testimony that  they don't have data  on recruitment and                                                               
retention. They didn't have data  on recruitment and retention in                                                               
2005 either,  but certain assumptions  were made that led  to the                                                               
very  narrow passage  of the  DC bill.  The advantage  he thought                                                               
they would  have now, four years  later, is having that  data But                                                               
with  the  lack  of  it  he  suggested  they  go  with  anecdotal                                                               
testimony  they  have  heard  from  public  employees  and  their                                                               
employers.                                                                                                                      
                                                                                                                                
2:29:19 PM                                                                                                                    
Finally,  he  asserted  that the  unfunded  liability  issue  was                                                               
raised again  and that's  the same kind  of testimony  they heard                                                               
four years ago.  He appreciated the comment  about asking precise                                                               
questions, because at  no place did he hear an  answer to whether                                                               
or  not Tier  IV  PERS  contributes to  or  lessens the  unfunded                                                               
liability, nowhere  did he hear  that Tier  III PERS does  one or                                                               
the  other or  that Tier  II or  III TRS  has any  effect on  the                                                               
unfunded liability. They just heard  that it exists and that it's                                                               
growing.                                                                                                                        
                                                                                                                                
The committee  has received testimony  from people like  Mr. Lamb                                                               
from  Fairbanks  and other  expert  testimony  has suggested  the                                                               
unfunded liability wouldn't grow or  decrease because of a switch                                                               
back to the DB system.                                                                                                          
                                                                                                                                
2:30:46 PM                                                                                                                    
SENATOR MEYER said he understood that  the basic change in the CS                                                               
makes the DB and DC plans  optional if you're already vested in a                                                               
retirement program.                                                                                                             
                                                                                                                                
SENATOR ELTON  replied it's  much more discreet  than that.  If a                                                               
new employee  already has a  DB plan and he  is being hired  by a                                                               
public employer, he has the option  of selecting a DC. The choice                                                               
is to a discrete number of potential employees.                                                                                 
                                                                                                                                
SENATOR  MEYER  asked why  the  options  are limited  to  certain                                                               
groups.                                                                                                                         
                                                                                                                                
2:32:57 PM                                                                                                                    
SENATOR  ELTON replied  that two  things were  compelling to  him                                                               
when  he wrote  the bill.  Studies have  shown that  the DC  plan                                                               
investments have been  hammered much more heavily  in this market                                                               
than the DB  investments. He said some bright  young person might                                                               
be able  to handle  a DC  plan over  a long  period of  time, but                                                               
there probably isn't a perfect recipe  on how to do it to protect                                                               
all  future  retirees.  The   Finance  Committee  recently  heard                                                               
testimony  from Michael  O'Leary  of Callan  and Associates,  who                                                               
said  one  of  the  problems  with DC  plans  is  that  they  are                                                               
especially vulnerable when  the market tanks. If  Mr. O'Leary has                                                               
a defined contribution  plan, he is probably  wondering now about                                                               
how  many  more  years  he  will  have to  work  to  get  to  the                                                               
retirement  he thought  he would  have. Finally,  he felt  that a                                                               
bright  young person  who is  capable of  making good  investment                                                               
decisions would  be doing it  outside his retirement  system also                                                               
in a way that would make the DB retirement even better.                                                                         
                                                                                                                                
2:35:46 PM                                                                                                                    
SENATOR MEYER  said he liked  the CS; it had  come a long  way in                                                               
meeting his concerns.  But they have heard  consistently that the                                                               
state needs  more tools to  recruit bright young people,  and why                                                               
not be able to offer both programs to those people.                                                                             
                                                                                                                                
2:36:20 PM                                                                                                                    
SENATOR  ELTON agreed  that he  might  be right,  but the  bigger                                                               
concern is  their retention. And  they just heard  that employees                                                               
in the DB plan are now leaving  and taking the money they put in.                                                               
The problem  with the DC  plan is they  can leave with  the money                                                               
they put in as well as the money the employer put in.                                                                           
                                                                                                                                
2:37:10 PM                                                                                                                    
BETH   ALMEIDA,  Executive   Director,   National  Institute   on                                                               
Retirement   Security,   a  non-profit,   non-partisan   research                                                               
organization that does research  on retirement issues, Washington                                                               
D.C.,  said she  would speak  to them  about the  findings of  an                                                               
important analysis  released today.  The title  of the  report is                                                               
"Pensionomics: Measuring the Economic  Impacts of State and Local                                                               
Pension Plans."                                                                                                                 
                                                                                                                                
Economists believe that  DB plans act as  an automatic stabilizer                                                               
in economies  like the  one we  are in now.  Even in  tough times                                                               
retirees with a  reliable pension can maintain  spending on basic                                                               
needs.   That  has  stabilizing effects  on  national, state  and                                                               
local economies.                                                                                                                
                                                                                                                                
2:39:44 PM                                                                                                                    
MS. ALMEIDA  said they  focused on state  and local  pensions for                                                               
this study because the census  bureau publishes data on state and                                                               
local pension plans that is fairly detailed at the state level.                                                                 
                                                                                                                                
2:40:14 PM                                                                                                                    
They  found that  in 2006,  expenditures  made out  of state  and                                                               
local retirement  benefits supported  2.5 million jobs  that paid                                                               
$92  billion   in  income,  $358   billion  in   economic  output                                                               
nationwide  and $57  billion  in federal,  state,  and local  tax                                                               
revenue.                                                                                                                        
                                                                                                                                
In  Alaska  (2006)  they found  retirement  benefit  expenditures                                                               
supported 6,270  jobs that  paid $385 million  in income,  had $1                                                               
billion  in  economic  output  statewide   and  $155  million  in                                                               
federal, state, and local tax revenue.                                                                                          
                                                                                                                                
2:42:24 PM                                                                                                                    
For each dollar  paid out in benefits to  Alaskan retirees, $1.25                                                               
worth of  economic activity  was seen in  the state.  Every $1.00                                                               
contributed by  taxpayers to state  and local  retirement systems                                                               
resulted in $6.35 in economic activity in the state.                                                                            
                                                                                                                                
2:43:35 PM                                                                                                                    
According  to  the  U.S.  Census Bureau  data,  close  to  35,000                                                               
Alaskans received pension benefits  from state and local pensions                                                               
in 2006,  the most  recent year  available for  the state,  for a                                                               
total of  $819 million.   The average  pension was  $1,953/mo. or                                                               
$23,440/yr.                                                                                                                     
                                                                                                                                
2:45:08 PM                                                                                                                    
Where does  the money come  from to finance these  systems? Their                                                               
data  goes  back  to  1993   and  they  found  over  that  period                                                               
investment  earnings and  employee contributions  were doing  the                                                               
lion's  share  of  the work  of  financing  retirement  benefits.                                                               
Investment  earnings accounted  for  about 70  percent of  system                                                               
revenues, employee contributions about  12.5 percent and employer                                                               
or  taxpayer contributions  were  responsible  for the  remaining                                                               
portion of about 18 percent.                                                                                                    
                                                                                                                                
2:45:53 PM                                                                                                                    
How do  pension plans  have economic  impacts? Pension  plans can                                                               
have  economic impacts  through several  different channels.  For                                                               
instance,  a  benefit  channel would  be  when  retirees  receive                                                               
benefits and they go out and  spend them in the local economy. By                                                               
virtue  of that  expenditure, other  folks in  the local  economy                                                               
receive income.                                                                                                                 
                                                                                                                                
Pension   plans  also   have  economic   impacts  through   their                                                               
investment  channel. This  means assets  which are  in a  pension                                                               
trust are invested and through  those investments, businesses are                                                               
provided  capital to  develop new  products and  technologies and                                                               
create jobs.  This study  focuses on  the benefit  channel rather                                                               
than on the investment channel.                                                                                                 
                                                                                                                                
                                                                                                                                
2:48:12 PM                                                                                                                    
Slide  11 showed  an  economic multiplier  effect  or the  direct                                                               
impacts of,  for example, a  retired school teacher who  uses her                                                               
pension  check to  buy a  new car.  The people  who work  for the                                                               
sales company  see an  immediate economic  benefit from  that and                                                               
this  is called  a  direct  impact. When  the  owner  of the  car                                                               
dealership or the salesman receives  that income, they can go out                                                               
and spend it.  This is called an indirect impact  of that initial                                                               
expenditure  that  the retiree  made.  When  those people  expend                                                               
their income,  there is a  third impact, an induced  impact, that                                                               
happens  when   the  companies  that   were  involved   with  the                                                               
production  of the  car hire  additional  employees to  replenish                                                               
their inventory as a result  of that increased business and those                                                               
employees go out and spend  their paychecks in the local economy.                                                               
This is referred to as the  multiplier effect and it explains how                                                               
the  initial spending  of a  pension benefit  ripples through  an                                                               
economy. To  measure the size  of that ripple effect,  again they                                                               
used  the  U.S.  Census  Bureau's   State  and  Local  Government                                                               
Employee Retirement System Survey data.                                                                                         
                                                                                                                                
2:49:47 PM                                                                                                                    
CHAIR  PASKVAN asked  her to  focus on  the conclusions,  because                                                               
they were running short on time.                                                                                                
                                                                                                                                
2:52:10 PM                                                                                                                    
MS. ALMEIDA  said using software  called "Implan" they  were able                                                               
to estimate  the economic  impacts of  the benefit  payments both                                                               
nationally and within the State  of Alaska. The expenditures made                                                               
out of these benefit payments  support about 6,270 jobs statewide                                                               
that paid about $385 million  in income. These benefits supported                                                               
$1 billion  in economic output  statewide and about  $155 million                                                               
in federal, state and local tax revenue.                                                                                        
                                                                                                                                
2:53:20 PM                                                                                                                    
Slide 15  showed the total  economic impact of $1  billion broken                                                               
down  into the  direct,  indirect and  induced  impacts. The  tax                                                               
revenue  impacts  were broken  down  into  their federal,  state,                                                               
local and  other corporate tax  categories. The $155  million tax                                                               
impact was fairly  evenly divided between federal  taxes paid out                                                               
of pension  benefits and federal  taxes that resulted  from those                                                               
expenditures of  $87.5 million, state  and local tax  revenues of                                                               
$67.8 million  and other corporate  taxes of about  $200,000. The                                                               
estimated impacts are on an annual basis.                                                                                       
                                                                                                                                
MS. ALMEIDA  said the industries  where the most  severe economic                                                               
impacts  were felt  were 1,300  jobs  in health  care and  social                                                               
assistance for $119 million in  economic impact, about 1,300 jobs                                                               
in retail  trade with about  $97 million in economic  impact, 839                                                               
jobs  in  the accommodation  and  food  services, and  then  real                                                               
estate  rental  and leasing  with  $51  billion in  impacts.  She                                                               
provided  a detailed  slide of  economic  impacts by  the top  10                                                               
industries.                                                                                                                     
                                                                                                                                
The pension  benefit multiplier indicated  that every  $1.00 paid                                                               
to retirees in  Alaska resulted in $1.25-worth  of total economic                                                               
activity. For every  $1.00 of taxpayer contribution  to state and                                                               
local  pensions  a  total  of  $6.35  of  economic  activity  was                                                               
created.                                                                                                                        
                                                                                                                                
2:53:47 PM                                                                                                                    
Slide 20 showed that the  taxpayer contribution factor is quite a                                                               
significant  on  each $100  they  are  investing in  the  pension                                                               
plans.                                                                                                                          
                                                                                                                                
2:54:44 PM                                                                                                                    
The conclusions  were that state  and local pension plans  have a                                                               
large economic footprint both nationally  and within Alaska. They                                                               
have  significant ripple  effects  and  sizable multipliers.  The                                                               
upfront investment of taxpayer dollar goes a long way.                                                                          
                                                                                                                                
2:55:46 PM                                                                                                                    
MS.  ALMEIDA summarized  that state  and local  pensions do  more                                                               
than  provide  a  critical  source of  reliable  income  for  7.3                                                               
million  retired  Americans  and 35,000  retired  Alaskans.  They                                                               
support 2.5  million American jobs  and $358 billion  in national                                                               
economic  activity.  They  support  6,270  Alaskan  jobs  and  $1                                                               
billion in  economic activity. It  keeps the  retirees continuing                                                               
to chug along, and this  steadiness helps others in the community                                                               
as well.                                                                                                                        
                                                                                                                                
2:59:26 PM                                                                                                                    
SENATOR BUNDE asked why they chose to study Alaska.                                                                             
                                                                                                                                
3:00:05 PM                                                                                                                    
MS. ALMEIDA  replied that this is  part of a national  study that                                                               
was released earlier today.                                                                                                     
                                                                                                                                
SENATOR BUNDE asked who paid for it.                                                                                            
                                                                                                                                
MS.  ALMEIDA replied  that they  are  a non-profit,  non-partisan                                                               
research  institute funded  by a  broad membership  that includes                                                               
trade  associations,  financial  service providers,  and  pension                                                               
plans across the country.                                                                                                       
                                                                                                                                
SENATOR  BUNDE said  any dollar  that flows  through the  economy                                                               
follows through  her economic  multiplier and  investment returns                                                               
are  the largest  portion that  supports a  DB plan,  much larger                                                               
than  worker  contributions. With  a  prolonged  down market,  he                                                               
asked if it wasn't true that  the state will end up providing the                                                               
majority of  the defined benefits  because investment  returns no                                                               
longer do  it. So, the notion  that this is a  stabilizer is only                                                               
valid as long as there is money in the account.                                                                                 
                                                                                                                                
MS.  ALMEIDA referred  him back  to  slide 9  that indicated  the                                                               
period of time over which  they did their calculation covered the                                                               
years 1993-2006,  which encompassed  both bear and  bull markets.                                                               
She said  one of  the benefits  of a DB  system is  the long-term                                                               
nature  of the  system. A  state sponsored  pension system  spans                                                               
decades  or even  more than  a century.  This is  quite different                                                               
than the  timing and planning  horizon of  an individual in  a DC                                                               
plan.  It  allows  for  a   better  kind  of  diversification  of                                                               
investment risk,  which makes a dollar  contributed to a DB  go a                                                               
lot further. DC investors must invest much more conservatively.                                                                 
                                                                                                                                
3:06:49 PM                                                                                                                    
SENATOR THOMAS moved to report CSSB 23(L&C) from committee with                                                                 
individual recommendations and forthcoming fiscal note.                                                                         
                                                                                                                                
SENATOR BUNDE objected to comment  that people have not looked at                                                               
other states.  State workers deserve  this, he said, but  at what                                                               
cost? He  said he has lost  confidence in the sponsor  of SB 141.                                                               
He  then  removed  his  objection and  CSSB  23(L&C)  moved  from                                                               
committee.                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
CS for SB 23.pdf SL&C 2/26/2009 1:30:00 PM
SB 23
CS for SB 23 Explanation of Changes.pdf SL&C 2/26/2009 1:30:00 PM
SB 23
SB23 - Restore Defined Benefit - Bill Packet.pdf SL&C 2/12/2009 1:30:00 PM
SL&C 2/19/2009 1:30:00 PM
SL&C 2/26/2009 1:30:00 PM
SB 23
SB84 - AIDEA Bonding Limits.pdf SL&C 2/17/2009 1:30:00 PM
SL&C 2/24/2009 1:30:00 PM
SL&C 2/26/2009 1:30:00 PM
SB 84
SB 84 Amendment.pdf SL&C 2/26/2009 1:30:00 PM
SB 84
SB 23_Pensionomics - Senate Labor and Commerce.pdf SL&C 2/26/2009 1:30:00 PM
SB 23