Legislature(2005 - 2006)BELTZ 211
03/22/2005 03:30 PM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SJR14 | |
| SJR8 | |
| SJR14 | |
| HB90 | |
| HB97 | |
| SB143 | |
| SB24 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SJR 8 | TELECONFERENCED | |
| *+ | SJR 14 | TELECONFERENCED | |
| + | SB 24 | TELECONFERENCED | |
| *+ | SB 143 | TELECONFERENCED | |
| + | HB 90 | TELECONFERENCED | |
| + | HB 97 | TELECONFERENCED | |
SB 24-REEMPLOYMENT OF RETIREES
4:55:22 PM
CHAIR GENE THERRIAULT announced SB 24 to be up for
consideration. He remarked the committee heard an overview on
the issue but hadn't heard the bill. He asked whether the
sponsor would be addressing his comments to the sponsor
substitute.
CHAIR GARY STEVENS, Sponsor, said he would address his comments
to the Senate HESS committee substitute. [CSSSSB 24(HES)]
The committee took an at-ease and reconvened at 5:00:29 PM.
SENATOR GARY STEVENS explained that SB 24 extends the retiree
rehire program established in 2001. That program allowed retired
state workers and teachers to rejoin the workforce without
giving up retirement payments. He reminded members that no
employee of an early Retirement Incentive Program (RIP) is
allowed to return unless employed as a commissioner.
Employers who use the program are required to pay any resultant
increase to the unfunded liability in the retirement system. It
also requires the PERS and TRS administrators to give an annual
report to the Legislature on the effect of the program.
Municipalities or public organizations that use the program
would be required to adopt a policy and resolution that permits
the employment of retirees. In addition, they must show that a
true shortage of qualified applicants exists.
TRS employees already have such a program and Governor Murkowski
just issued Administrative Order 225, which sets very strict
sideboards for recruitment of state employees.
Extending the program would help public employers attract and
retain qualified workers in hard-to-fill positions. It would
give employers four more years to transition the current
workforce before the reemployment provisions sunset. Finally, it
is cost neutral in that it eliminates any additional retirement
credit during re-employment.
5:03:46 PM
SENATOR HUGGINS said he can see the merit in the proposal, but
he is concerned that this would allow older employees to remain
in the workforce and prevent entrance to younger employees. He
recalled a graph from the Department of Administration that
showed seven teachers aides were rehired and several rehires
were in urban areas. He suggested the qualifications for those
positions aren't that high and many people would probably apply.
He said, "That's my case in point and concern of what we do is
we choose, through the good old boy network, we just retain our
buddies."
SENATOR STEVENS said he became interested in the issue when he
realized several outstanding teachers in his district had
retired and decided they wanted to return to work a few years
later but were precluded from doing so. Those teachers were lost
to Oregon, which is a terrible shame. It's not his intention to
create a good old boys club. Rather, this extension would allow
retirees to be rehired for hard-to-fill positions. It requires
employers to begin thinking about how they will eventually
replace certain positions.
SENATOR WAGONER said he understands the intent, but this program
is one of the most abused programs he has ever seen. He
suggested other approaches could be taken to address shortages
in the education area. He pointed to SB 98, which lists the
villages that have difficulty recruiting teachers and suggested
limiting the bill's application to specific areas.
5:08:31 PM
SENATOR GARY STEVENS said he appreciated the concern and
certainly there have been abuses, but this is an effort to
tighten the program. In addition, Administrative Order 225 does
a fine job of setting up sideboards for the rehiring process for
public employees. He repeated TRS retirees have already been
addressed and a true shortage of applicants must be demonstrated
before this could occur.
SENATOR KIM ELTON declared a potential conflict of interest,
because he is a retired public employee.
5:10:20 PM
SENATOR ELTON said the sponsor has noted that the employer would
pick up any hit on either of the retirement accounts. However,
this bill goes further in that it has a retroactive clause for
both TRS and PERS accounts.
He agreed with Senator Wagoner that the previous extension
assumed good behavior on the part of all employers, but abuses
probably did occur. This bill makes the director of the Division
of Retirement and Benefits the responsible party and he or she
would have to certify that the employer proved a failed
recruitment and they would have to demonstrate how in-house
training would occur to bring skills up to date to "bring in new
blood." He credited the Murkowski Administration with stepping
forward to address abuses.
He offered two instances for consideration. First is the
community hospital, which is a PERS employer that has rehired
retired nurses. Recruiting nurses has been difficult because the
field is competitive and the hospital is no longer competitive.
Without this program, service in each of the elements in the
hospital would be impacted.
The second instance relates to the potential impact on local
school districts with regard to hiring long-term subs. According
to statewide contract provisions, any sub that is hired for
longer than 20 days automatically becomes a TRS member. Having
to pay the employer TRS contribution creates an additional cost
to the school district and without this program school districts
couldn't rehire a retired teacher as a long-term sub.
A number of different issues come into play regarding rehiring
retirees, and the last two situations speak to the need for a
rehire program in place that is better written and precludes
abuse, he concluded.
5:15:16 PM
SENATOR BETTYE DAVIS declared herself a retired public employee.
SENATOR WAGONER declared himself a retired TRS member with no
thought of coming out of retirement.
Acknowledging recruitment and pay scale issues in the nursing
field, he suggested that this type of program could be used to
get around increasing pay scales. He opined that when people
retire the ulterior motive is to change lifestyle, but the
ulterior motive of this process has become nothing but money.
People are retiring and returning to work to substantially
increase their annual income. For instance the Alaska Department
of Fish and Game has at least 37 rehired employees that are
affected. "It became a good old boys system," he asserted. He
urged members to be very careful before re-enacting the program.
"Even with the sideboards that are there, I'm not very
comfortable with it," he said.
5:17:57 PM
SENATOR GARY STEVENS declared himself to be a retired TRS
member. Responding to the comment that it's nothing more than
money, he said a retiree could go anywhere and get a job and
continue to work while collecting retirement. "I don't know that
it should be seen as such a negative thing that someone wants to
have retirement and earn a salary," he said. And remember, this
is only for a year at a time
Certainly everyone recognizes the difficult situation with PERS
and TRS and from the start the intention was to ensure that PERS
and TRS weren't impacted. "I think we've achieved that," he
concluded.
5:19:13 PM
CHAIR THERRIAULT declared he isn't old enough to retire.
Referencing demographic information from the 2/10/05 overview on
the impact of the retiree/rehire program, he noted that 45
people age 45 to 49 retired from TRS and were subsequently
rehired. He suggested that the general public's discontent with
the program stems in part from the fact that the system allows a
person to draw retirement after working for 20 years when he or
she is clearly not of retirement age. However, the situation
isn't outside the norm in his district that has two military
installations. It's not at all uncommon for military personnel
retire after 20 years. "Certainly if you've spent 20 years in
the military moving around and possibly in active duty, I don't
begrudge people the right to do that," he said.
He acknowledged that a number of constituents offered the
opinion that, at the very least, the system needed sideboards.
It's still not clear whether or not the sideboards established
through Administrative Order 225 are adequate.
SENATOR ELTON commented the retired PERS employees who were "20
and out" are generally in public safety. For those PERS
employees who weren't in the line of fire, the earliest
retirement age was age 50 and that was considered an early
retirement.
5:21:39 PM
SENATOR WAGONER indicated the savings of $1,091,720 is correct
as far as it goes. However, had the retirees not been allowed to
return under contract and had other people taken those jobs
contributions would have been made to the PERS/TRS accounts. The
number is misleading, he argued, because rehires create a
negative impact on those accounts and if new people had been
hired the impact would have been positive.
SENATOR HUGGINS agreed with the previous statement then reported
that reemployment after military retirement has sideboards.
He asked that the administration discuss the net effect to the
people currently working under the provision if it's renewed.
Taking exception to the comment that a retired teacher is the
best substitute teacher, he said that if he were making the
decision he would insist on hiring a new person rather than a
retiree. That way the new hire could gain experience. This is a
contrast in styles he said. There isn't a right or wrong answer.
CHAIR THERRIAULT told members he was ready to take testimony
from the public.
SENATOR ELTON referenced Senator Wagoner's comment and said his
understanding is that bringing a retired teacher into the system
is preserving the status quo and if a new person is brought in
it would increase the unfunded liability.
SENATOR WAGONER didn't believe that to be the case and said the
Division of Retirement and Benefits could weigh in.
CHAIR THERRIAULT said he had questions on the fiscal note, but
would open teleconference testimony first.
5:26:20 PM
ROBERT McHATTIE, retired PERS employee from Fairbanks, said he
is interested in protecting the PERS retirement program against
too many people occupying state, borough, or municipal jobs
while not paying into PERS or TRS. The argument that experienced
employees can't be replaced doesn't wash because employees go on
vacation, become ill, die and are terminated and the various
organizations don't fall apart as a result. Every employee is
replaceable and it's an administrator's job to ensure that the
rehiring effort is effective, aggressive and one in which a
competitive wage is offered.
His experience is that state human resource personnel tend to be
passive when replacing high-level employees and he suggested
following:
· Consider the retirement check to be a payment for
retirement, not just a quasi pay increase.
· Find a replacement since one will be necessary sooner or
later.
· If a person must be rehired, hire that person as a
temporary and continue to look for a replacement. Allow one
year for this process.
· Increase mentoring or training so that the workplace can
move on when a person retires.
5:30:30 PM
CHARLES SWANTON, 20-year employee with the Alaska Department of
Fish and Game (ADF&G), testified via teleconference. He is
currently under the 30-year retirement program and his comments
related strictly to ADF&G.
He opposed the retiree rehire program in its current form as it
is a benefit to a select few and won't benefit the department's
core employees, who are unlikely to be offered participation in
a similar program in the future. It's ironic, he said, that most
department employees who currently participate in the program
are making more money than the department commissioner.
MR. SWANTON said the basis for the 2001 legislation was ill
founded and without appropriate instruction for application. He
commended the sponsor of SB 24 for the addition of the
application criteria, however he continued to oppose the bill on
a number of elements.
PERS needs fiscal input from all current active employees to
remain semi-solvent. If the program didn't exist the department
would be provided an opportunity for a new era of positive
change. Specialized knowledge and skills is acquired while
working up through the ranks and can be replaced albeit with
some bumps. "Keeping the bumps from occurring are worth what to
the state in terms of cost?" He offered the opinion that several
program participants are very deserving of additional
compensation, but they are the exception and not the rule. This
program has and will continue to diminish departmental morale.
"And at what cost," he asked.
5:32:58 PM
SENATOR WAGONER asked what the program has done to the overall
morale of employees that are trying to work up the ladder to
administrative level.
MR. SWANTON said he could best describe it as a kick in the gut.
5:33:48 PM
TIM VIAVANT, Fairbanks resident and current ADF&G employee,
testified via teleconference to urge members to oppose SB 24.
The concept goes against the principle of how PERS is supposed
to work. Language in the CS requires the employer to make up the
shortfall in contributions, but the employee's share wouldn't be
added to the PERS account.
The concept has a negative affect on employee morale and on the
recruitment of new employees. In addition it has a negative
affect on retaining employees who may not yet be vested in PERS.
Certainly the argument about a potential "brain drain" has been
overblown. Finally, the whole idea of recruitment and retention
would be less problematic if adequate cost-of-living allowances
had been negotiated in contracts over the last 18 or 19 years.
5:36:59 PM
JACK KERIN, testified from Fairbanks, to comment on previous
testimony about rehired retirees who were incorrectly told they
would be grandfathered in when the original legislation sunset.
Concern has been expressed about possible litigation if the
employees aren't grandfathered, but he questioned whether there
shouldn't be greater concern about litigation from all
retirement age employees over the discriminatory process used to
determine who is offered the "platinum parachute benefit." The
concept is poor and the program needs to sunset.
With regard to the argument that the program is cost neutral, he
suggested that the actuaries for Tier I employees who don't
retire because they can't afford to are often overlooked. Those
employees aren't offered the opportunity to receive a double
salary and they're supporting PERS with 50 to 58 percent of
their salary.
5:39:56 PM
TINA HABIB testified from Craig in opposition to the bill. She
is a retired PERS employee working for the municipality. She
agreed with former comments about animosity among employees and
how the system is abused. She reminded members that PERS has
been in existence since 1961 and for 40 years the provision was
unnecessary. Employers and employees have had 5 years to get
prepared for the July 1 sunset.
With regard to the argument that the sunset would impact cities
she pointed out that Craig's employer obligation is 20.33
percent so it's already an impact. The more people that are out
of PERS the greater the impact, she said.
5:41:44 PM
MIKE TIBBLES, Deputy Commissioner, Department of Administration
spoke in support of SB 24. He said he would highlight two
important goals that SB 24 would provide then discuss two main
concerns that were raised and how the department has worked to
resolve those concerns.
SB 24 would allow the approximately 335 employees currently
working under the HB 242 waiver to continue receiving retirement
benefits beyond the original sunset date. That's important for
several reasons. First, it's unfortunate but a number of those
employees were told they would be able to stay on after July 1.
Also, if the issue isn't addressed a number of senior employees
might exit the system to retain their retirement benefits. This
would have a great impact on school districts, municipalities,
and the state. Finally, SB 24 would provide an effective
management tool to help employers fill positions they aren't
otherwise able to fill, which was the intent of the original
legislation.
MR. TIBBLES pointed out the state is facing severe recruitment
challenges; it can't compete with the 25 percent federal COLA
and it doesn't pay market wages. The system is based on internal
alignment so the state classification and pay system isn't based
on market wages. For example, it doesn't allow salary increases
based on inequities between the State of Alaska and Providence
Hospital. To ensure internal alignment, the system compares a
nurse working for the state to like duties and responsibilities
in another state position such as a social worker. What the
program can do is fill those positions on a short-term basis.
MR. TIBBLES referenced the cost and savings aspects and
explained that individuals that come back on a 242 waiver don't
accrue any additional retirement benefits and the employer
doesn't contribute the normal cost rate on the employee's
behalf. However the cost comes into play because the pool of
employees that are otherwise contributing to pay off the
unfunded liability becomes smaller. The actuaries indicate that
there is currently an impact for the TRS system at a rate of
$106,000 per year. The impact can be quantified by .02 percent
of the base salary.
The savings of bringing someone back who is no longer
contributing the normal cost rate is 12.75 percent for the PERS
system. So even though there's a cost to the system, there's a
larger savings for that employer. SB 24 requires that employers
pay into the system at the point that a cost is triggered. The
computation involves taking the wage base of the employee and
calculating it into the past service rate. That contribution
would still represent a savings to the employer.
As was previously stated, "There's been a $1 million savings to
the State of Alaska since this program's been in place because
the state is not contributing for those individuals to a normal
cost rate - not in the past service rate."
MR. TIBBLES addressed the concern about making sure the program
is used as intended, which is only when there are demonstrated
recruitment difficulties. Referencing Administrative Order 225
he said the requirements are:
· That agency is going to have to competitively recruit the
position.
· If somebody would like to retire then come back they could
take the risk that that position is going to be
competitively recruited for a minimum of 15 days.
SENATOR WAGONER suggested that the person that retires from a
position should be excluded from the pool of future applicants
until after the position is competitively advertised and the
pool is generated.
MR. TIBBLES said under AO 225 the individual could apply but the
recruitment must be statewide and once the applicant pool is
gathered a recruitment challenge would have to be demonstrated
to the Division of Personnel indicating why no other candidate
has the knowledge, skill, and ability to perform the job. Also,
if the recruitment brings more than five qualified applicants
then the retiree wouldn't be eligible. "It's in effect and it
has been working," he said.
Because the process of bringing people back is a short-term
solution, the Division of Personnel in the Department of
Administration will be very proactive in working with
departments that want to bring people back from retirement to
make sure they are building workforce plans.
5:53:38 PM
CHAIR THERRIAULT asked Mr. Tibbles touch on the highlights so
that public testimony could be closed. Ms. Steinberger from the
Attorney General's Office was on line to talk to the committee
under an executive session about the possible legal
ramifications of grandfathering or not grandfathering.
5:54:35 PM
MR. TIBBLES advised that Administrative Order 225 requires the
following before an agency could bring someone back from
retirement to fill a position:
· The position must be recruited through a competitive
process
· The competitive process must post the position for a
minimum of 15 days
· The hiring authority must consider all applicants not
just a selected pool
· All individuals brought back under 242 must be
separated from state service for a minimum of 30 days
· Before a position is offered to an applicant, the
administrative order would require that the
recruitment process result in an applicant pool of
fewer than 5 qualified, eligible and available
applicants
· The hiring authority must demonstrate why no other
individual has the knowledge, skills and ability to
perform those duties
· The approval for hire must be secured in writing from
the director of personnel
· Within 60 days after receipt of the director of
personnel's approval for a waiver, the department
seeking the waiver must identify the critical
components of the position
· The department must identify the knowledge skills and
abilities that need to be developed in the workplace
to assure that the work can be accomplished when the
rehired retiree separates from service again
· A development plan that accomplishes a transfer of
knowledge is required
· Applicable statutes and personnel rules will apply
· State agencies are encouraged to develop a strategic
view of human resource needs including development of
a workforce plan with the assistance of the division
of personnel
5:57:51 PM
SENATOR HUGGINS commented, "There's something fundamentally
wrong that a person says, 'I'm going to retire.' and they turn
the switch off and they come back to work in 30 days in the same
job."
MR. CHRIS CHRISTENSEN, Deputy Administrative Director, Alaska
Court System, informed members that the court system has found
the retiree rehire program to be very helpful and it hopes the
program will be extended. The court system has approximately 650
non-judicial employees of which 10 participate in this program.
Given the nature of those positions, those employees are
significant to court system operations.
The program has helped address two problems. First, the court
system has a large number of one-person job classifications such
as the state law librarian. When the primary responsibility of a
position is unique, continuity of service is problematic. When
such a position becomes vacant, no one on staff can pick up the
work.
He stressed the importance for these one-person job classes to
remain filled with knowledgeable and experienced people.
Internal recruitment is difficult because the positions often
require an advanced degree and in the court system most
employees are range 15 or less clerical workers.
Another problem is that the court system frequently has few
qualified applicants for its supervisory positions so
supervisors are often retained. The fundamental problem and
reason for this is high turnover. More than 50 percent of court
system employees are paid at ranges 6, 8 or 10 so an annual 50
percent turnover is typical. Forty percent of the court system's
employees are located in Anchorage so it is competing with the
Municipality of Anchorage (MOA). Although the salary structure
is similar, MOA pays more employee benefits. In some rural
locations the court system has experienced 100 percent turnover
in one year. Certainly public service doesn't have the draw it
did years ago and the court system would be struggling without
the retiree rehire program.
The RIP program became extremely problematic for the court
system and the retire rehire program partially compensates for
those problems.
CHAIR THERRIAULT asked if he had requested that the Legislature
not participate in the RIP program.
MR. CHRISTENSEN didn't recall.
6:03:12 PM
MS. BARBARA HUFF-TUCKNESS, Director of Governmental and
Legislative Affairs for Teamsters Local 959, stated support for
SB 24. She represents employees with the MOA who have
participated in this program and for whatever reason MOA hasn't
suffered from the program.
When this program first went into effect, language was
negotiated in the collective bargaining agreements that
addressed the retiree rehire issue. Of the 18 waivers requested
by the MOA, 12 retirees were rehired in a system that has over
2,025 employees.
MOA has a tremendous number of retired military that have
returned to classified, non-classified and politically appointed
positions. This isn't viewed as a negative because they bring
valuable resources and knowledge to the workplace.
The program has been used very successfully in the engineering
and public health sectors because it's been difficult to keep up
with cost of living increases, health benefit changes, and
competition with the private sector.
Individuals that are currently enrolled in the program and are
within MOA were under the belief that they would be
grandfathered in. In fact many structured work and retirement
plans based on that fact. "For the record I would request that
the least that could be done here would be grandfather in those
particular individuals that are currently participating in the
program," she said.
The Municipality of Anchorage has saved over $.25 million with
the 12 individuals that have been participating in the program.
She urged the committee to seriously look at the pros and cons
of the program and move the bill from committee.
6:07:26 PM
SENATOR WAGONER announced that U.S. Senator Ted Stevens
mentioned that this might be the last year that federal
employees living in Alaska receive the cost of living allowance
differential.
CHAIR THERRIAULT noted there was no further testimony.
He asked for a motion that the committee move into executive
session to take testimony from the Department of Law on whether
the grandfathering question raises a legal issue.
SENATOR WAGONER moved that the Senate State Affairs Committee go
into executive session under AS 44.62.310 to consider matters
the immediate knowledge of which could clearly have an adverse
affect upon the finances of the State of Alaska. There being no
objection, the committee went into executive session.
SB 24 was held in committee.
CHAIR THERRIAULT reconvened the meeting after the executive
session and adjourned at 6:51:52 PM.
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