Legislature(2021 - 2022)ADAMS 519

05/05/2021 01:30 PM House FINANCE

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Heard & Held
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Transportation & Public Facilities
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Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 5, 2021                                                                                             
                         1:33 p.m.                                                                                              
1:33:31 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Merrick called the  House Finance Committee meeting                                                                    
to order at 1:33 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Kelly Merrick, Co-Chair                                                                                          
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Bryce Edgmon                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
Representative Steve Thompson                                                                                                   
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Sara Rasmussen                                                                                                   
ALSO PRESENT                                                                                                                  
Rob   Carpenter,   Deputy    Commissioner,   Department   of                                                                    
Transportation   and   Public   Facilities;   Dom   Pannone,                                                                    
Administrative    Services     Director,    Department    of                                                                    
Transportation and  Public Facilities, Office  of Management                                                                    
and Budget, Office of the Governor.                                                                                             
PRESENT VIA TELECONFERENCE                                                                                                    
James    Marks,   Program    Development,   Department    of                                                                    
Transportation  and Public  Facilities; John  Binder, Deputy                                                                    
Commissioner,  Department   of  Transportation   and  Public                                                                    
Facilities;   David  Kershner,   Principal  and   Consulting                                                                    
Actuary, Buck Global.                                                                                                           
HB 55     PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS                                                                             
          HB 55 was HEARD and HELD in committee for further                                                                     
HB 70     APPROP: CAP; REAPPROP; SUPP; AMEND                                                                                    
          HB 70 was HEARD and HELD in committee for further                                                                     
Co-Chair Merrick reviewed the meeting agenda.                                                                                   
HOUSE BILL NO. 70                                                                                                             
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,     reappropriations,     and     other                                                                    
     appropriations;  making   supplemental  appropriations;                                                                    
     making   appropriations   to  capitalize   funds;   and                                                                    
     providing for an effective date."                                                                                          
1:34:11 PM                                                                                                                    
ROB   CARPENTER,   DEPUTY    COMMISSIONER,   DEPARTMENT   OF                                                                    
TRANSPORTATION   AND   PUBLIC   FACILITIES,   introduced   a                                                                    
PowerPoint   presentation  titled   "Alaska  Department   of                                                                    
Transportation   and   Public  Facilities:   House   Finance                                                                    
Committee  Capital  Program  and FY2022  Request  Overview,"                                                                    
dated  May 5,  2021 (copy  on  file). He  addressed a  brief                                                                    
presentation outline on slide 2.                                                                                                
Mr. Carpenter moved  to slide 3 and  reviewed the Department                                                                    
of  Transportation  and   Public  Facilities  (DOT)  capital                                                                    
budget  funding summary.  He highlighted  that  there was  a                                                                    
total capital  request of $1.12 billion,  with approximately                                                                    
$950   million  of   federal   receipts,   $19  million   in                                                                    
Unrestricted General  Funds (UGF), $1 million  in Designated                                                                    
General Funds  (DGF), and other state  funds totaling $144.7                                                                    
million. He  pointed out the  funding sources listed  to the                                                                    
left   including  sources   that  comprised   'other'  funds                                                                    
including  highway working  capital  funds  that funded  the                                                                    
state   equipment   fleet,  international   airport   funds,                                                                    
statutory designed program  receipts, Alaska Housing Finance                                                                    
Corporation (AHFC) bonds, and a small portion of UGF.                                                                           
1:37:05 PM                                                                                                                    
DOM  PANNONE, ADMINISTRATIVE  SERVICES DIRECTOR,  DEPARTMENT                                                                    
OF   TRANSPORTATION  AND   PUBLIC   FACILITIES,  OFFICE   OF                                                                    
MANAGEMENT  AND BUDGET,  OFFICE OF  THE GOVERNOR,  addressed                                                                    
state  capital  appropriations  on   slide  4.  He  reviewed                                                                    
programmatic  and  recurring requests  on  the  left of  the                                                                    
slide.    Items   included    mental   health    coordinated                                                                    
transportation  and  vehicles,  the  Alaska  Marine  Highway                                                                    
System (AMHS)  vessel overhaul,  the state  equipment fleet,                                                                    
federal-aid  highway  match  credits,  and  federal  program                                                                    
match. He  elaborated on  each of the  items. He  noted that                                                                    
the  AMHS overhaul  was  a capital  investment  to keep  the                                                                    
ships  running  and  improve short-side  infrastructure.  He                                                                    
discussed  the department's  use  of  the highway  equipment                                                                    
working  capital  fund, through  which  it  paid a  rate  on                                                                    
depreciating assets  and received credits. He  discussed the                                                                    
federal highway match credits,  through which the department                                                                    
used  the authority  to request  match credits  for earnings                                                                    
from a  capital project for  items such as selling  a right-                                                                    
of-way. He would address the  federal program match on slide                                                                    
5. He  moved to the  right of  slide 4 and  reviewed single,                                                                    
one-time   items   including  a   computerized   maintenance                                                                    
management system and weigh station  scale repairs. He noted                                                                    
that there  was a  significant list of  needs to  extend the                                                                    
life of several weigh stations.                                                                                                 
1:40:43 PM                                                                                                                    
Vice-Chair  Ortiz   looked  at   the  programmatic/recurring                                                                    
annual requests  on slide  4. He asked  if the  figures were                                                                    
constant or changed annually.                                                                                                   
Mr. Pannone  answered that the figures  varied occasionally.                                                                    
He used  the example  of the current  year's request  of $15                                                                    
million,  with prior  year's requests  of $18.5  million and                                                                    
$14.9 million.  He continued that the  state equipment fleet                                                                    
had been  steady, with the  current year's  appropriation at                                                                    
$15 million, and  an increase of $7 million  proposed for FY                                                                    
22 as  the replacement  list had grown.  He stated  that the                                                                    
amount varied but hovered around the amounts listed.                                                                            
Representative  LeBon  looked  at the  weigh  station  scale                                                                    
repairs item  on slide  4. He  asked about  the relationship                                                                    
between weigh station repairs and federal highway dollars.                                                                      
Mr.  Pannone replied  that there  were requirements  for the                                                                    
state to ensure  the integrity of its assets,  which was the                                                                    
reason  that measurement  standards  and commercial  vehicle                                                                    
compliance was housed in DOT.  He continued that there was a                                                                    
specific set  of funding  that could be  in jeopardy  if the                                                                    
state wasn't protecting its  assets from overweight vehicles                                                                    
or certifying that the roads were used without damage.                                                                          
Representative  LeBon pointed  out that  the purpose  of the                                                                    
weigh stations  was not to  harass truckers but  to maintain                                                                    
and protect roads to qualify for federal highway dollars.                                                                       
1:43:53 PM                                                                                                                    
Representative  Thompson   believed  there   were  portable,                                                                    
temporary  weigh scales  around the  state to  put in  areas                                                                    
temporarily. He  asked if the portable  scales were included                                                                    
in the funding request.                                                                                                         
Mr. Pannone answered that the  scales were permanent and not                                                                    
temporary.  The fixed  weigh station  scales  were in  seven                                                                    
Co-Chair  Merrick  asked for  some  examples  of what  might                                                                    
qualify  for the  Mental  Health Coordinated  Transportation                                                                    
Vehicles Grant.                                                                                                                 
Mr.   Pannone  replied   thought  there   was  a   community                                                                    
transportation transit  agency in Juneau and  knew there was                                                                    
one in Anchorage. He deferred the question to a colleague.                                                                      
JAMES    MARKS,   PROGRAM    DEVELOPMENT,   DEPARTMENT    OF                                                                    
TRANSPORTATION AND  PUBLIC FACILITIES  (via teleconference),                                                                    
agreed with  the remarks by  Mr. Pannone. He  explained that                                                                    
the Alaska  Mental Health Trust  Authority (AMHTA)  was part                                                                    
of  the rural  transit agency  for granting  out for  people                                                                    
with disabilities across the state.  He would need to follow                                                                    
up with a more comprehensive list.                                                                                              
1:45:46 PM                                                                                                                    
Mr. Carpenter addressed federal  programs and state match on                                                                    
slide  5. He  mentioned the  Federal Highway  Administration                                                                    
(FHWA)    funding,   which    funded   road    construction,                                                                    
reconstruction,  design  and  engineering. There  was  a  10                                                                    
percent  state  match  for  a total  of  $71.2  million  for                                                                    
surface   transportation   program.  The   Airport   Capital                                                                    
Improvement  Program  (ACIP)  had $269  million  in  federal                                                                    
receipts with  a 6.25 percent  match of  approximately $14.7                                                                    
million.  The  funding was  guided  by  the Airport  Capital                                                                    
Improvement Plan. He mentioned  that the state was federally                                                                    
required  to   provide  a  document  called   the  Statewide                                                                    
Transportation  Improvement  Program  (STIP),  which  showed                                                                    
planning for all the state's federal highway construction.                                                                      
Mr. Marks  provided a  primer on  the STIP  on slide  6. The                                                                    
STIP was  a four-year  plan required by  federal regulations                                                                    
that  listed out  all the  federally  funded and  regionally                                                                    
significant  surface  transportation   projects  within  the                                                                    
state.  The STIP  had  to be  fiscally  constrained and  was                                                                    
required to  be developed  with a  public process.  The STIP                                                                    
was approved  by FHWA or the  Federal Transit Administration                                                                    
(FTA). He  explained that a  failure to comply  with federal                                                                    
regulations  and   requirements  would   jeopardize  federal                                                                    
funding for transportation infrastructure in Alaska.                                                                            
1:48:58 PM                                                                                                                    
Mr.  Marks advanced  to slide  7 and  reviewed a  handful of                                                                    
illustrations  showing  the  STIP   process.  He  read  from                                                                    
prepared  remarks. He  highlighted  a  box entitled  'Needs'                                                                    
Sources' that  showed how project needs  were identified and                                                                    
where  the  needs  came  from,  including  sources  such  as                                                                    
performance data, condition data,  local needs, and military                                                                    
and  defense needs.  He  spoke to  the  yellow box  entitled                                                                    
'Needs Evaluation  and Management,"  which showed  a process                                                                    
flow chart.  The department utilized  a needs  database that                                                                    
was   routinely  evaluated   and  was   intended  to   be  a                                                                    
comprehensive list notwithstanding funding availability.                                                                        
Mr. Marks continued to speak to  slide 7. The red box showed                                                                    
a  flow  chart  depicting  the   process  of  the  call  for                                                                    
projects,  which was  fed  by the  needs  list and  happened                                                                    
periodically every one to two  years. When the need for more                                                                    
projects was identified, project  scoring and public comment                                                                    
was  engaged. He  discussed the  public comment  process. He                                                                    
discussed  the  project  selection process  by  which  other                                                                    
regional  entities and  partners were  solicited for  input.                                                                    
Project packages  were formed and  evaluated. He  cited that                                                                    
the  Project  Evaluation  Board (PEB)  scored,  ranked,  and                                                                    
prioritized projects.  The PEB process was  a public meeting                                                                    
open to  participation from the  public, and  the department                                                                    
hoped  to  host future  events  virtually.  The PEB  process                                                                    
submitted  scoring to  the commissioner's  office. He  noted                                                                    
that  the  icon  depicting little  yellow  people  indicated                                                                    
times  at which  the  department actively  engaged with  the                                                                    
public for input on the STIP.                                                                                                   
Mr. Marks addressed  the STIP Cycle illustrated  by the flow                                                                    
chart  in the  blue  box.  The STIP  cycle  was a  four-year                                                                    
program that was  updated every two years.  He discussed the                                                                    
activities   of   the  department   including   establishing                                                                    
parameters,  soliciting  regional  input, and  balanced  the                                                                    
projects' fiscal considerations before  putting the STIP out                                                                    
for  public  notice.  The process  was  federally  required,                                                                    
highly  public,  and  usually took  about  45  days.  Public                                                                    
notice  comments  were  directed   to  those  close  to  the                                                                    
project.  After public  notice,  the  department engaged  in                                                                    
getting the  approval of the  FHWA and the FTA,  after which                                                                    
the  department   would  publish  its  fully   approved  and                                                                    
executed STIP.                                                                                                                  
1:54:40 PM                                                                                                                    
Mr.  Marks  continued  reading  from  a  prepared  statement                                                                    
related to the  STIP process. He reminded that  the blue box                                                                    
showed a single  STIP cycle that typically took  2 years. He                                                                    
noted   that   sometimes   updates  were   needed   due   to                                                                    
contingencies.  He  discussed changes  to  the  STIP in  two                                                                    
categories: minor  changes that  could be  an administrative                                                                    
modification,   and   larger   changes   including   adding,                                                                    
deleting,  or changing  the scope  of work  required a  STIP                                                                    
amendment  that required  the  full  STIP process  including                                                                    
federal approval.  Developing a  STIP could  take up  to two                                                                    
years and amending a STIP could take up to 220 days.                                                                            
Co-Chair  Merrick noted  that  Representative Carpenter  had                                                                    
joined the meeting.                                                                                                             
Vice-Chair Ortiz looked at needs'  sources on the upper left                                                                    
of the slide and asked  for a brief description of condition                                                                    
and performance data.                                                                                                           
Mr. Marks  replied explained  that the  department monitored                                                                    
and   measured  all   its  condition   and  performance   of                                                                    
facilities and  assets, which  was required  federally. Some                                                                    
of  the   performance  measures  could   include  monitoring                                                                    
vehicle miles  travelled or data  on average  daily traffic.                                                                    
Condition  data  could include  an  actual  condition of  an                                                                    
asset such as  rutting or cracking. The  data were published                                                                    
on  the federal  score  card  not only  the  asset, but  any                                                                    
correlated assets.                                                                                                              
1:57:38 PM                                                                                                                    
Vice-Chair Ortiz  looked at  the STIP cycle  on slide  7 and                                                                    
observed that  it required  commissioner approval.  He asked                                                                    
if  the  commissioner  could  modify the  STIP  as  much  as                                                                    
desired after the entire process.                                                                                               
Mr.  Marks replied  in the  negative. He  clarified that  in                                                                    
practice  the commissioner  would approve  what had  already                                                                    
been approved and public noticed.  Any changes after federal                                                                    
approval would require going back to the public.                                                                                
Vice-Chair    Ortiz   asked    what   the    arrow   showing                                                                    
administrative modification meant (shown  to the left of the                                                                    
commissioner's approval box under the STIP cycle).                                                                              
Mr.  Marks answered  that administrative  modifications were                                                                    
changes that small  in nature, such as a  shifting a project                                                                    
schedule  or  a  change  order.   Additions  or  changes  to                                                                    
projects or  phases would  have to  go through  an amendment                                                                    
and the full public involvement process.                                                                                        
Vice-Chair Ortiz  asked if  it was common  for a  project to                                                                    
stay on the STIP for longer  than four years. He asked if it                                                                    
was not uncommon for projects to  remain on the STIP for six                                                                    
to eight years.                                                                                                                 
Mr.  Marks answered  in the  affirmative. He  explained that                                                                    
project  delivery  ranged  from  three to  seven  (or  more)                                                                    
years. The longer view items remained on the STIP.                                                                              
2:00:44 PM                                                                                                                    
Representative   LeBon   referenced   an   intersection   in                                                                    
Fairbanks  that connected  his district  with Representative                                                                    
Thompson's district.  He believed  there needed  an overpass                                                                    
for safety  and efficiency reasons.  He asked if  safety and                                                                    
efficiency  factored  into  the department's  decisions.  He                                                                    
thought  the  intersection  being proposed  was  unique  and                                                                    
cheaper  than   other  designs.   He  thought   traffic  was                                                                    
increasing in the area.                                                                                                         
Mr. Carpenter  asked Mr.  Marks to  talk about  how projects                                                                    
were scored.                                                                                                                    
Mr. Marks asked for clarification.                                                                                              
Representative  LeBon  was  not sure  whether  his  question                                                                    
about a  specific project was  fair. He was  concerned about                                                                    
an intersection  in Fairbanks and thought  an overpass would                                                                    
be prudent for safety.                                                                                                          
Mr. Marks  responded that  there were  a number  of criteria                                                                    
including safety, project cost,  economic benefit as well as                                                                    
other factors.  He did not  know how the  particular project                                                                    
was scored and he could follow up with information.                                                                             
Representative LeBon referenced the  needs sources and asked                                                                    
about  military  and  defense   needs.  He  noted  that  the                                                                    
intersection  he  mentioned  was  at the  entrance  to  Fort                                                                    
Wainwright,  and  reiterated  his expectation  of  increased                                                                    
traffic in the area.                                                                                                            
Co-Chair  Merrick asked  if it  would  be fair  to say  that                                                                    
legislators had  no say in  which projects were on  the STIP                                                                    
and the order in which the projects were listed.                                                                                
Mr. Marks  did not  believe it was  necessarily true  to say                                                                    
legislators had no  say in which projects were  on the STIP.                                                                    
He  explained  that  it  was   a  public  process,  and  the                                                                    
department  was  engaged  with  all  parties  including  the                                                                    
legislature.  He noted  that there  were staff  dedicated to                                                                    
working with  the legislature,  and the  department actively                                                                    
solicited input.  He shared  that he  and Mr.  Carpenter had                                                                    
discussed ways to improve the collaboration.                                                                                    
2:05:49 PM                                                                                                                    
Mr. Carpenter emphasized the public  portion of the process.                                                                    
He referenced the layout showing  a group of people on slide                                                                    
7  reflecting  public   participation  and  solicitation  of                                                                    
Co-Chair Merrick  was trying to illustrate  that legislators                                                                    
did not create the list and there was a public process.                                                                         
Representative Wool  assumed that not every  DOT project was                                                                    
on the STIP.                                                                                                                    
Mr.  Carpenter  clarified  that virtually  all  of  the  DOT                                                                    
projects were  included on  the STIP.  He noted  that almost                                                                    
all  of the  department's  capital program  ran through  the                                                                    
federal program. He cited that  every phase of projects from                                                                    
design to construction ran through the STIP.                                                                                    
Mr.  Pannone elaborated  that some  small projects  could be                                                                    
paid for out  of DOT's maintenance and  operating budget. He                                                                    
reiterated  that federal  dollars, which  was almost  all of                                                                    
the department's  surface transportation program,  came from                                                                    
the STIP.                                                                                                                       
Mr. Marks  added that  there were a  number of  projects and                                                                    
programs in the  STIP. He used the example  of the statewide                                                                    
regional maintenance  project was comprised of  a whole host                                                                    
of smaller projects during the year.                                                                                            
2:08:54 PM                                                                                                                    
Representative  Wool referenced  public  input  in the  STIP                                                                    
process.  He acknowledged  that the  department took  public                                                                    
input into account. He referenced  a roundabout project that                                                                    
had  been done  near  Chena Hot  Springs  that had  received                                                                    
public opposition but had been  constructed anyway. He noted                                                                    
that a  previous legislator  had de-funded  the item  in the                                                                    
budget. He  thought the  only supporters  were from  DOT. He                                                                    
wondered how  effective public  input was  when there  was a                                                                    
divergence of opinion.                                                                                                          
Mr. Carpenter  appreciated Representative Wool's  points. He                                                                    
noted that decisions often came  down to safety, which could                                                                    
outweigh  public   input.  He  cited  that   the  department                                                                    
encouraged  public  input  and   often  changed  or  amended                                                                    
routes.   He  offered   to  provide   more  detail   on  the                                                                    
Representative Wool asked for  detail on socioeconomic needs                                                                    
included in the STIP needs' sources box on slide 7.                                                                             
Mr.   Marks  answered   that  the   items  were   identified                                                                    
internally  or  through  collaboration with  local  official                                                                    
partners  which identified  projects of  economic importance                                                                    
or things  that might  boost the  economy such  as improving                                                                    
congestion in particular freight corridors.                                                                                     
Representative  Wool  recalled  a  proposition  for  a  road                                                                    
improvement in  Fairbanks which had  caused a great  deal of                                                                    
uproar, and he  believed the department had  listened to the                                                                    
public input.                                                                                                                   
Co-Chair Merrick  considered ongoing  programs in  the STIP.                                                                    
She asked if the Glenn Highway fell into the category.                                                                          
Mr. Marks  answered in the  negative. He explained  that the                                                                    
Glenn  Highway and  other large  highways would  be distinct                                                                    
projects in the STIP in which  work was done on one chunk at                                                                    
a time.                                                                                                                         
2:14:13 PM                                                                                                                    
Mr. Marks moved to slide  8 titled "STIP: Federal Limitation                                                                    
Over Time." He reviewed the  slide with prepared remarks. He                                                                    
noted  that  federal  funding was  either  portioned  via  a                                                                    
formula or  allocated to the  department. He  continued that                                                                    
FHWA placed a  limitation on programming. He  noted that the                                                                    
department was  currently in federal  FY 21, so  the numbers                                                                    
could change  before the year  was complete. He  pointed out                                                                    
that the projections for FY  21 appeared larger, chiefly due                                                                    
to the off-funding signified by  the grey bars on the chart,                                                                    
and  represented  preparation  of Coronavirus  Response  and                                                                    
Relief  Supplemental  Appropriations  Act  (CRRSAA)  funding                                                                    
that could be available for the capital program.                                                                                
Mr.  Marks   turned  to  slide   9  titled   "STIP:  Federal                                                                    
Obligations  by  Year."  He  explained  that  an  obligation                                                                    
occurred  when   the  department  executed  a   federal  aid                                                                    
agreement with  the FHWA for  a specific phase of  a project                                                                    
in the STIP. He pointed  out the bars representing different                                                                    
regions and noted that the bar  graph did not evenly line up                                                                    
with  the  graph  on  the previous  slide,  because  of  two                                                                    
factors - the  lifespan of funds, and  project delivery life                                                                    
cycle. The life  cycle could take from three  to seven years                                                                    
to design and  construct the project. He pointed  out the FY                                                                    
13  through FY  15  showed higher  amounts  due to  projects                                                                    
developed  under  American  Recovery  and  Reinvestment  Act                                                                    
(ARRA) coming into the construction phase of work.                                                                              
Mr.  Marks pointed  out  that AMHS  was  represented by  the                                                                    
yellow    bar   and    the    distribution   might    appear                                                                    
disproportionately low,  due to confounders in  the data. He                                                                    
discussed account variation that  allowed for flexibility in                                                                    
funds  management.   He  cited  accounting   conversions  in                                                                    
certain years, as well as  a significant overlap in regional                                                                    
efforts  that could  also confound  the data.  He cited  $90                                                                    
million  in  funding obligated  the  previous  year for  the                                                                    
Ketchikan Gateway  Borough under the south  coast region. He                                                                    
noted that a  large portion of total AMHS  funding was found                                                                    
in the operating  budget and what was seen on  the graph was                                                                    
only   federal   capital   obligations.   Obligations   were                                                                    
currently underway  for the  year, and  the graph  broke out                                                                    
CRRSAA funds.                                                                                                                   
2:18:15 PM                                                                                                                    
Representative LeBon looked at  the colored bars showing two                                                                    
shades of  blue for northern  areas and statewide  areas. He                                                                    
wondered if  DOT viewed  the Dalton  Highway as  a statewide                                                                    
highway or a northern region highway.                                                                                           
Mr.  Marks  replied  that  the  Dalton  Highway  fell  under                                                                    
northern region projects.                                                                                                       
Representative  LeBon  suggested  that  the  Dalton  Highway                                                                    
benefitted the entire state, and  the northern region should                                                                    
not be solely responsible for funding the project.                                                                              
Mr.  Carpenter  agreed  with  the  comment  related  to  the                                                                    
statewide  significance of  the Dalton  Highway. He  thought                                                                    
that the Legislative Finance  Division considered the impact                                                                    
of projects versus its  geographic classifications. He noted                                                                    
the statewide  bar covered  programs in  the STIP  that were                                                                    
truly statewide geographical programs.                                                                                          
Representative Wool believed  in the geographic distribution                                                                    
of assets.  He mentioned the  Port of Anchorage,  which many                                                                    
people  called  the Port  of  Alaska  because of  the  large                                                                    
distribution of goods.                                                                                                          
2:21:00 PM                                                                                                                    
JOHN    BINDER,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                    
TRANSPORTATION AND  PUBLIC FACILITIES  (via teleconference),                                                                    
turned to slide 10  titled "Airport Project Evaluation Board                                                                    
(APEB)." He discussed  the ACIP, which mirrored  the STIP in                                                                    
many ways. He  explained that there were  differences in how                                                                    
the  Federal Aviation  Administration  (FAA) handled  things                                                                    
compared  to  the  FHWA.  The FAA  did  not  require  public                                                                    
approval or public  notice of the spending  plan but engaged                                                                    
with  the  public  during project  development.  Needs  were                                                                    
developed  in  close  involvement  with  stakeholders,  then                                                                    
evaluated by  APEB. He mentioned  the Statewide  Division of                                                                    
Aviation,  and  the ACIP,  which  scored  projects based  on                                                                    
specific criteria.  The criteria  were related  closely with                                                                    
the  FAA's nationally  required criteria.  There were  needs                                                                    
varying  from  the FAA  standard  in  different states.  The                                                                    
projects  were prioritized  on a  statewide basis,  and then                                                                    
fit  into  the FAA's  national  priority  ranking. The  ACIP                                                                    
development  was  a  five-year rolling  plan  that  included                                                                    
scored projects from the APEB.  The department tried to hold                                                                    
projects  harmless   once  within   two  years   of  project                                                                    
construction. The department was  able to insert projects in                                                                    
the event of an emergency or natural disaster.                                                                                  
2:24:53 PM                                                                                                                    
Mr. Binder  addressed slide  11 titled  "Airport Improvement                                                                    
Program  (AIP)  for DOT  &  PF  Airports  in FFY  2020."  He                                                                    
pondered  the  question  of  how funds  got  to  Alaska  and                                                                    
informed  that   Alaska  was  its  own   FAA  region,  which                                                                    
benefitted the state tremendously.  The funding amounts were                                                                    
formula-driven   with  consideration   of  several   factors                                                                    
including  numbers  of  passengers  and  cargo.  There  were                                                                    
approximately 25 airports in Alaska  that were designated as                                                                    
"primary"  based  on the  number  of  passengers. The  state                                                                    
apportionment was  based on  the size of  land mass  and the                                                                    
population.  Due to  the lack  of infrastructure  in Alaska,                                                                    
Congress established  the Alaska  supplemental, which  was a                                                                    
special  additional   federal  appropriation   for  projects                                                                    
selected by  the FAA. After  nationwide allocation,  the FAA                                                                    
had  a remaining  pot of  discretionary  funds for  projects                                                                    
ranked  in  priority. In  addition,  funds  unused by  other                                                                    
states  that were  not able  to use  their entitlement  were                                                                    
rolled into the discretionary fund.                                                                                             
Representative Edgmon  shared that his  district experienced                                                                    
high airport  traffic volumes  in the  summer. He  asked how                                                                    
the department estimated airport traffic.                                                                                       
Mr.  Binder  answered  that  the  FAA  based  the  funds  on                                                                    
reported passengers from the prior  year. Some airlines were                                                                    
good about  reporting the figures  to the FAA,  while others                                                                    
were not. The numbers were  rolled into the formulas for the                                                                    
following year.                                                                                                                 
Representative Edgmon  referenced RAVN  Air and  thought the                                                                    
FAA should have  good numbers. He stated that  a small place                                                                    
like Bristol  Bay could get  upwards of $100,000  people per                                                                    
year. He  thought it  would be interesting  to get  a better                                                                    
sense  of  the airport  reports.  He  mentioned airport  and                                                                    
cargo  volume  in  Bethel  and  Nome. He  asked  if  it  was                                                                    
possible to get the information.                                                                                                
2:29:32 PM                                                                                                                    
Mr. Binder  answered that the  department could pull  up the                                                                    
reported  data from  previous  years.  The department  would                                                                    
work with the  air carriers for passenger  estimates for the                                                                    
present and future.                                                                                                             
Representative Edgmon  asked if the information  went to the                                                                    
Department   of   Labor   and  Workforce   Development   for                                                                    
statistical  purposes, or  if the  information only  went to                                                                    
Mr.  Binder replied  that  the number  was  reported to  the                                                                    
United  States  Department  of Transportation's  T100  data,                                                                    
which  tracked  passenger  and  cargo  volumes  at  airports                                                                    
Co-Chair Merrick looked at cargo  entitlements at the top of                                                                    
slide  11.  She  asked  about  the  landed  weight  for  the                                                                    
Anchorage International Airport.                                                                                                
Mr. Binder would follow up with the information.                                                                                
Co-Chair Merrick  was curious about  the number  because she                                                                    
believed  the Anchorage  airport was  one of  the top  cargo                                                                    
airports in the world.                                                                                                          
Mr.  Binder  moved to  slide  12  and addressed  the  Alaska                                                                    
International  Airport System  (AIAS) capital  funding based                                                                    
on FY 20. He noted that  AIAS was an enterprise fund system,                                                                    
were  self-sustaining (per  statute),  and did  not use  any                                                                    
state dollars.  He continued that  AIAS generated  about $40                                                                    
million in ACIP  funding each year. He pointed  out that the                                                                    
amount was  a little low in  FY 20 due to  no large projects                                                                    
at the  time. He reiterated  that the funds could  be rolled                                                                    
over  to future  years.  He  pointed out  the  close to  $40                                                                    
million in  anticipated funds for  FY 21, which  were broken                                                                    
down into amounts for  discretionary funds and entitlements.                                                                    
He noted  that the FAA authorization  bill, typically passed                                                                    
on  a three-year  or five-year  basis, covered  most of  the                                                                    
ACIP,  but Congress  would typically  insert aviation  funds                                                                    
into other bills, which was called supplemental funding.                                                                        
2:33:08 PM                                                                                                                    
Representative LeBon  asked about  the formula  for dividing                                                                    
money between  the Fairbanks  International Airport  and the                                                                    
Anchorage  International Airport.  He considered  the FY  20                                                                    
amounts and acknowledged that  Anchorage had greater numbers                                                                    
and more  activity, but  observed that in  FY 21  the spread                                                                    
between the  airports was  huge. He  asked if  Fairbanks had                                                                    
been overlooked. He did not think  it made sense. He did not                                                                    
see any supplemental funds for the Fairbanks airport.                                                                           
Mr. Binder  clarified that the  funds went to the  owner and                                                                    
operator of  the airports, and both  Anchorage and Fairbanks                                                                    
international  airports  were   owned  by  an  international                                                                    
airport system. The funds went as  a whole to the system, to                                                                    
be  allocated each  year based  on capital  needs. He  noted                                                                    
that  Fairbanks had  a large  runway rehabilitation  project                                                                    
that  had  recently  started, which  was  reflected  by  the                                                                    
larger chunk from FY 20.  The capital needs on both airports                                                                    
were funded in large part by  ACIP dollars, and the rest was                                                                    
funded by the carriers operating in each airport.                                                                               
Mr.  Binder advanced  to  slide 13  and  reviewed the  rural                                                                    
system  capital  funding  FFY  2016  through  FFY  2020.  He                                                                    
commented  that FY  20 funds  were  significantly higher  as                                                                    
unused  international funds  had  rolled over  to the  rural                                                                    
system.  In  addition,  there  were  approximately  7  local                                                                    
airports  in the  state that  also  had a  very low  capital                                                                    
year.  Typically, rural  airports had  a 6.25  percent match                                                                    
for  federal dollars.  Due to  Coronavirus Aid,  Relief, and                                                                    
Economic Security  (CARES) Act and American  Rescue Plan Act                                                                    
(ARPA) funding for FY 20,  there was no required state match                                                                    
for federal funds.                                                                                                              
Co-Chair  Merrick asked  if Mr.  Binder had  defined what  a                                                                    
rural airport was.                                                                                                              
Mr. Binder  answered that  he had not,  and stated  the term                                                                    
was  used  freely.  He explained  that  DOT  considered  the                                                                    
Anchorage  and  Fairbanks  were part  of  the  international                                                                    
system,  and the  rural airports  were everything  else. The                                                                    
international system was the owner  of the two airports, and                                                                    
DOT owned the rest.                                                                                                             
Representative  Wool asked  if the  other municipally  owned                                                                    
airports  such as  Palmer,  Wasilla, and  Juneau  were in  a                                                                    
category or if the airports were in their own group.                                                                            
Mr.  Binder answered  that most  locally sponsored  airports                                                                    
compared to  rural airports, except  Juneau which  was close                                                                    
to the size of the  Fairbanks airport. He explained that for                                                                    
specific  capital projects,  the municipally  owned airports                                                                    
worked directly  with the  FAA. He  noted that  DOT included                                                                    
the airports in its planning.                                                                                                   
2:38:23 PM                                                                                                                    
Mr.  Binder  moved to  slide  14,  "Major Rural  System  AIP                                                                    
Construction Projects  Expected to be  Funded in FFY  2021 &                                                                    
2022,"  which  gave  an  example  of  some  of  the  project                                                                    
construction for  the current and  following year.  He noted                                                                    
that  typically FAA  dollars were  not freed  up until  late                                                                    
spring  or   summer  which  meant  most   projects  went  to                                                                    
construction  the year  following the  grant. The  FAA broke                                                                    
down  projects into  four main  categories: safety,  payment                                                                    
rehab, rural access, and buildings.  He offered to follow up                                                                    
after the meeting with greater detail.                                                                                          
Vice-Chair  Ortiz asked  where  the  Ketchikan airport  fell                                                                    
into  the category  in relationship  to  other airports.  He                                                                    
thought the airport was managed  by the borough but owned by                                                                    
the state.                                                                                                                      
Mr.  Binder   answered  that   the  Ketchikan   airport  was                                                                    
considered one  of the rural  airports and was owned  by the                                                                    
state  with  an  operating  agreement   in  place  with  the                                                                    
borough.  All  the revenue  generated  covered  the cost  of                                                                    
operations, which usually  ended up a little  short. A small                                                                    
part of  the south  coast region's  budget was  allocated to                                                                    
Ketchikan.  He thought  that  since the  FAA  broke out  the                                                                    
CRRSA  and ARPA  funds specific  to airports,  Ketchikan was                                                                    
receiving  the full  allocation of  federal funding  through                                                                    
2:41:18 PM                                                                                                                    
Mr. Carpenter addressed  federal program project allocations                                                                    
on slide  15. He  noted that the  two largest  projects were                                                                    
appropriation   with   no   allocations  for   the   surface                                                                    
transportation  program and  the ACIP  covering all  the FAA                                                                    
funding.  Prior to  FY 18,  the two  major federal  programs                                                                    
were broken  out into individual project  allocations in the                                                                    
capital  budget.  He addressed  the  pros  and cons  of  the                                                                    
method. The pros  included that the method  had provided the                                                                    
legislature  with additional  clarity  and  allowed for  the                                                                    
Legislative  Finance Division  House  district reporting  to                                                                    
give  an   understanding  of  the  geographic   balance  and                                                                    
significance of  statewide projects.  The cons  included the                                                                    
challenge to  manage the  individual allocations  because of                                                                    
project cost increases and slippage.                                                                                            
Representative  Wool  surmised that  prior  to  FY 18  every                                                                    
project would  be listed in  an appropriations bill.  He saw                                                                    
how the practice  could be very political and  asked if that                                                                    
had been a challenge for the department.                                                                                        
Mr. Carpenter emphasized that the  STIP process guided where                                                                    
the funding  went, so  for the  purpose of  the legislature,                                                                    
the individual  project allocations  were simply a  guide as                                                                    
to  where the  funds went.  Other than  the public  process,                                                                    
there was not really an opportunity to change items.                                                                            
Representative  Wool was  not  sure the  process  was a  bad                                                                    
Mr.   Carpenter  addressed   slide   16  titled   "Potential                                                                    
     Working with the other body to address the two primary                                                                     
     challenges of:                                                                                                             
          ?Project Cost Increases                                                                                             
          ?Project Slippage                                                                                                   
     Solution -Create Additional Allocations:                                                                                   
          ?Project Contingency                                                                                                
          ?Project Acceleration                                                                                               
Mr. Carpenter read slide 17, "New Allocations":                                                                                 
     Project Contingency Allocation:                                                                                            
          ?Provides a federal authority "pot" when projects                                                                   
          incur cost over-runs.                                                                                                 
     Project Acceleration Allocation:                                                                                           
          ?Provides a federal authority "pot" for when                                                                        
          projects are delayed                                                                                                  
               ?Allows for the advancement of a project in                                                                      
               the STIP that is ready that may not be                                                                           
               listed in the appropriation bill                                                                                 
HB  70  was   HEARD  and  HELD  in   committee  for  further                                                                    
2:46:27 PM                                                                                                                    
AT EASE                                                                                                                         
2:57:03 PM                                                                                                                    
HOUSE BILL NO. 55                                                                                                             
     "An  Act relating  to  participation  of certain  peace                                                                    
     officers and  firefighters in  the defined  benefit and                                                                    
     defined  contribution plans  of  the Public  Employees'                                                                    
     Retirement  System of  Alaska; relating  to eligibility                                                                    
     of  peace   officers  and  firefighters   for  medical,                                                                    
     disability, and  death benefits; relating  to liability                                                                    
     of the  Public Employees' Retirement System  of Alaska;                                                                    
     and providing for an effective date."                                                                                      
2:57:48 PM                                                                                                                    
AT EASE                                                                                                                         
2:58:12 PM                                                                                                                    
DAVID  KERSHNER,  PRINCIPAL  AND  CONSULTING  ACTUARY,  BUCK                                                                    
GLOBAL (via  teleconference), shared  that the firm  was the                                                                    
actuary  for the  Department of  Administration Division  of                                                                    
Retirement and  Benefits. He continued that  Buck Global had                                                                    
completed a cost-benefit analysis for  the bill. He asked if                                                                    
he should  summarize the  key elements of  the bill  and the                                                                    
Co-Chair Merrick agreed.                                                                                                        
Mr.  Kershner explained  that the  bill  would allow  active                                                                    
members   of  the   Peace  Officers   and  Firefighters   an                                                                    
opportunity to transfer to  the Public Employees' Retirement                                                                    
System  (PERS) Defined  Benefit  (DB)  Plan which  currently                                                                    
only  covered  employees  hired  prior  to  July  2006.  The                                                                    
Defined  Contribution (DC)  Plan covered  those hired  after                                                                    
2006. The  bill proposed that  all future hires  would enter                                                                    
the  DB  plan. There  was  a  separate schedule  of  benefit                                                                    
provisions that  would apply to  the members covered  by the                                                                    
bill, as  well as  cost-sharing provisions. He  relayed that                                                                    
the  Alaska Retirement  Management (ARM)  Board oversaw  the                                                                    
funding of  the PERS system,  and per statute  all employers                                                                    
contributed a fixed 22 percent of  pay to the PERS system. A                                                                    
portion went  to the  DC plan  and the  remainder of  the 22                                                                    
percent  went to  the DB  plan. The  cost sharing  would not                                                                    
change, but  under the  bill a new  separate trust  would be                                                                    
established  in  the  PERS  system   that  would  cover  the                                                                    
benefits provide for the members  affected by HB 55. All the                                                                    
assets contributed to the trust  would be separately tracked                                                                    
and dedicated for the members.                                                                                                  
Mr.  Kershner continued  to describe  the provisions  of the                                                                    
bill.   He   explained    that   currently   PERS   employer                                                                    
contribution  rate   was  fixed  at  22   percent,  and  the                                                                    
actuarial contribution  was based  on ARM board  policy. The                                                                    
excess  of the  contribution rate  was the  additional state                                                                    
contribution  rate.  He  cited that  currently  the  members                                                                    
covered  under  HB 55  had  just  under  10 percent  of  pay                                                                    
contributed to  the DC plan,  and the  remainder contributed                                                                    
to  the DB  plan. Under  HB 55,  there would  be 12  percent                                                                    
going to  the trust  as well as  the HRA  accounts currently                                                                    
set up,  which left 12  percent to  go towards the  DB plan.                                                                    
The portion  of the  employee contribution going  toward the                                                                    
DB  benefit  plan  for  members  would  decrease  from  12.2                                                                    
percent to 10  percent of pay. The difference  would have to                                                                    
be  made  up  per  ARM  Board policy  and  was  made  up  by                                                                    
additional  state contributions.  The  fiscal note  included                                                                    
the  estimated increase  for five  years  starting of  about                                                                    
$5.3 million in  FY 23 and $28.4 million for  the five years                                                                    
3:04:57 PM                                                                                                                    
Representative Thompson asked what  the figure would be with                                                                    
correctional officers included.                                                                                                 
Mr.   Kershner  replied   that  he   was  not   certain  the                                                                    
corrections  officers were  included in  the group  of peace                                                                    
officers and firefighters in the bill.                                                                                          
Representative   Josephson    clarified   that   corrections                                                                    
officers were covered as part of the group.                                                                                     
Mr. Kershner was happy to  provide further details or answer                                                                    
Representative Josephson asked if  the plan would be solvent                                                                    
if Alaska had  just become a state and the  only DB plan was                                                                    
for peace officers and firefighters.                                                                                            
Mr. Kershner  answered in the  affirmative. If the  plan had                                                                    
just started  there would be  no assets or  liabilities, and                                                                    
under  the funding  policy  each year  a  percentage of  pay                                                                    
would  be contributed  that was  equivalent to  the cost  of                                                                    
benefits accruing under  the plan. As long  as the actuarial                                                                    
calculations projected dozens of  years into the future, and                                                                    
if  there  were  related  to  life  expectation,  length  of                                                                    
employment, and salary amounts.  He acknowledged that in any                                                                    
given year  the assumptions would  not be correct,  but they                                                                    
should  be  reasonably close  to  actual  experience in  the                                                                    
long-term. He  noted that every  year there  were deviations                                                                    
from the assumptions, and if assets  did not earn as much as                                                                    
expected  there were  created  losses to  the  plan and  the                                                                    
losses had to be funded over a period of time.                                                                                  
Mr.  Kershner continued  that  if the  plan  started in  the                                                                    
present, and  all of the experience  matched assumptions for                                                                    
the future, accrued  benefits would be funded  and the state                                                                    
would never have any of the  losses. The state would only be                                                                    
funding  the  benefits  accruing  annually in  the  8  to  9                                                                    
percent  range.  He   noted  that  the  PERS   DB  plan  was                                                                    
significantly underfunded  at present  and the cost  for the                                                                    
DB plan  was a makeup for  the current costs in  addition to                                                                    
unfunded  liabilities  accumulated  over time.  He  affirmed                                                                    
that if the  plan were to start today, the  cost sharing and                                                                    
contribution  rates proposed  in SB  55 would  be enough  to                                                                    
cover  the cost  of the  benefits if  all future  experience                                                                    
matched the assumptions.                                                                                                        
3:10:08 PM                                                                                                                    
Representative  Josephson reiterated  that if  the plan  was                                                                    
starting fresh it would be  solvent at inception and without                                                                    
a negative  history. He referenced  HB 79 from  the previous                                                                    
legislature,  which  was  related  to  the  same  topic  and                                                                    
"virtually  identical." He  recalled that  Mr. Kershner  had                                                                    
determined that HB 79 was  anticipated to be somewhere above                                                                    
99 percent anticipated solvent.                                                                                                 
Mr. Kershner answered that the  HB 55 trust that would cover                                                                    
the liabilities for the members  as well as the assets being                                                                    
transferred  in, was  expected  to remain  solvent for  many                                                                    
years. He  addressed the $5.3  million cost increase  for FY                                                                    
23 that  was due to the  portion of the 22  percent employer                                                                    
contribution  currently going  into the  DB plan,  and noted                                                                    
that more  would go to the  new trust. The increase  was not                                                                    
because  the HB  55 trust  was  not solvent  or expected  to                                                                    
remain  solvent,  rather there  was  a  shifting of  the  22                                                                    
percent between the  various trusts was giving  rise to cost                                                                    
3:12:45 PM                                                                                                                    
Representative  LeBon referenced  HB  79  from the  previous                                                                    
legislature,  which  was  related  to  the  same  topic.  He                                                                    
recalled  that  the  fiscal note  had  totaled  $18  million                                                                    
through the five years ending  2027, and he thought the note                                                                    
had jumped up  to $28 million for the same  period. He asked                                                                    
about  the  unfunded liability  for  the  PERS program,  and                                                                    
referenced  an  amendment  proposed  to  transfer  about  $1                                                                    
billion  from  the  Permanent  Fund to  PERS  to  close  the                                                                    
unfunded liability.  He asked what  impact the  action would                                                                    
have had  in the discussion  about a DB program  as proposed                                                                    
by HB 55.                                                                                                                       
Mr.  Kershner replied  that if  $1 billion  were transferred                                                                    
into the DB  plan, the cost impact of HB  55 would likely be                                                                    
similar to  what Buck  had determined  for the  bill because                                                                    
the  current additional  state contribution  would go  down.                                                                    
The plan  would start  from a lower  funding point,  and the                                                                    
provision  of HB  55  would enact  the  same cost  increases                                                                    
through a shifting of contributions.  Under HB 55, the state                                                                    
would contribute about  $5.2 million less into  the DB plan,                                                                    
and  the cost  would be  independent of  the $1  billion. He                                                                    
contemplated  the  scenario  of  putting $3  billion  or  $4                                                                    
billion into  the PERS system,  which would likely  wipe out                                                                    
the initial  state contribution  entirely with  no increase.                                                                    
He acknowledged  that a $1  billion contribution  would help                                                                    
the  funding of  the DB  plan,  but it  would not  eliminate                                                                    
underfunding, and  there would still be  an additional state                                                                    
contribution of a lower amount.                                                                                                 
Mr. Kershner mentioned the analysis  of HB 79 and noted that                                                                    
the most recent  analysis was in February  2020. The process                                                                    
had started about a year earlier  and was based on 2018 data                                                                    
because it  had been the  most recent available data  at the                                                                    
time. The HB 55 analysis was  based on 2020 data, and in the                                                                    
two years  the payroll  for peace officers  and firefighters                                                                    
had increased  about 11  percent in total  for a  larger pay                                                                    
base resulting in larger dollar amounts than under HB 79.                                                                       
3:17:09 PM                                                                                                                    
Representative LeBon  stated that one of  his motivations in                                                                    
the discussion  was two-fold. He believed  that establishing                                                                    
a new  DB program  meant the state  needed to  consider that                                                                    
the current  DB plan was  still underfunded. He  believed it                                                                    
needed to  be fixed. He stated  that it would take  18 years                                                                    
to close  the current liability.  He added that he  may have                                                                    
included Teachers' Retirement System  (TRS) in the estimate.                                                                    
He asked about  fixing the liability and making  room in the                                                                    
budget for a new DB plan.                                                                                                       
Co-Chair Merrick  noted that Mr. Kershner  had referenced an                                                                    
11 percent increase in payroll.  She asked if it was because                                                                    
the  state had  hired  more officers  or  increased pay  for                                                                    
existing officers.                                                                                                              
Mr. Kershner  answered that the  increase was  a combination                                                                    
of  both factors.  There were  more active  members than  in                                                                    
2018,  and  the recent  pay  increases  had been  more  than                                                                    
3:19:41 PM                                                                                                                    
Representative  Wool  referenced Representative  Josephson's                                                                    
question about whether the plan  from SB 55 would be solvent                                                                    
if it was  isolated on its own. He thought  Mr. Kershner had                                                                    
given the plan a high score.                                                                                                    
Mr. Kershner answered affirmatively.                                                                                            
Representative Wool  thought because  the state  already had                                                                    
an underfunded  DB system, it  was not possible to  keep the                                                                    
two plans separate entities. He  asked if it was possible to                                                                    
pay down  the old  system while  maintaining the  new system                                                                    
proposed in the bill.                                                                                                           
Mr.  Kershner replied  that based  on the  way the  bill was                                                                    
designed, the  HB 55  members would  be employees  under the                                                                    
PERS  system and  PERS employers  contributed 22  percent of                                                                    
pay, which was allocated  to different trusts depending upon                                                                    
the specific  yearly calculations. He continued  that if the                                                                    
HB 55  plan was established  separately from PERS,  it could                                                                    
turn out  to be  more or less  expensive. He  explained that                                                                    
under  HB 55,  part of  the 10  percent of  the payroll  for                                                                    
peace officers  and firefighters would being  deposited into                                                                    
the  underfunded DB  plan. Currently  about 12.2  percent of                                                                    
pay  was deposited  into the  plan. The  decrease from  12.2                                                                    
percent to 10 percent was  equivalent to about $5.2 million,                                                                    
which was reflected  in the increase in the  fiscal note for                                                                    
FY  23. The  amounts would  be a  shifting of  contributions                                                                    
away from  the unfunded  liability in the  DB plan,  and the                                                                    
amount  would  be  made  up  through  the  additional  state                                                                    
3:23:05 PM                                                                                                                    
Representative  Wool   asked  about  the   conversations  on                                                                    
solvency and the efficacy of  the plans. He recalled that if                                                                    
the  market  returns  dropped,   there  was  a  trigger  and                                                                    
employees would  have to contribute more.  He considered the                                                                    
increased  retention  the  groups would  likely  experience,                                                                    
which was  one of the purposes  of the bill. He  asked if it                                                                    
was included in the analysis.                                                                                                   
Mr. Kershner  answered that there  were two  triggers within                                                                    
HB 55 that meant if the HB 55  trust were to fall below a 90                                                                    
percent   funding   level,   the   post-retirement   pension                                                                    
adjustment  could  be  limited,  or the  current  8  percent                                                                    
member contribution  could be increased to  ten percent. The                                                                    
two  provisions had  not come  into play  because the  HB 55                                                                    
trust was not  anticipated to fall below  90 percent funded;                                                                    
however,  if it  did  fall  below, the  two  items could  be                                                                    
triggered.  He  asked  for  a  repeat of  the  rest  of  the                                                                    
Representative Wool asked if  increased retention of members                                                                    
was included in the calculations.                                                                                               
Mr.  Kershner  answered  in  the  affirmative.  The  current                                                                    
active  members  were   projected  through  retirement,  all                                                                    
current retired  members through the retired  years based on                                                                    
life  expectancy, and  a certain  percentage of  the members                                                                    
were  expected  to  terminate  employment  every  year.  The                                                                    
assumptions  depended on  age,  service,  gender, and  other                                                                    
factors. The  withdrawal assumption  rates were  higher than                                                                    
the corresponding  rates in the  DB plan due to  the general                                                                    
tendency to  have more workforce mobility  for those covered                                                                    
by  a DC  plan compared  to a  DB plan.  The lower  turnover                                                                    
assumptions were used for members  expected to transfer into                                                                    
the DB plan.                                                                                                                    
3:27:00 PM                                                                                                                    
Representative  LeBon   looked  at  the  fiscal   note  (OMB                                                                    
Component Number  2866) showing $5.3  million in FY  23 with                                                                    
upward  growth to  $5.6  million, and  $6.1  million in  the                                                                    
subsequent  years. He  was not  surprised  there was  upward                                                                    
growth in  funding. He noted  it dropped to $5.7  million in                                                                    
FY  26 and  FY  27 and  thought the  funding  impact to  the                                                                    
proposed  program had  many unknowns.  He felt  there was  a                                                                    
sense of urgency  to deal with the  unfunded liability prior                                                                    
to opening another DB program.                                                                                                  
Representative   Josephson    was   concerned    about   the                                                                    
possibility of  waiting another 20  years. He looked  at the                                                                    
amortization period  out to pay  off the  unfunded liability                                                                    
went out to 2041. He asked if the estimate was correct.                                                                         
Mr. Kershner answered in the affirmative.                                                                                       
Representative  Josephson shared  that he  was currently  56                                                                    
years old  and would be  77 when the unfunded  liability was                                                                    
retired.  He thought  the implication  of adding  the fiscal                                                                    
note would result in an additional 6 months of payment.                                                                         
3:29:34 PM                                                                                                                    
Mr. Kershner  responded that all  projections were  based on                                                                    
current funding  status and  expectations about  the future,                                                                    
which included  assets growing about  7.4 percent  per year.                                                                    
He  noted  that  in  the  current  fiscal  year  assets  had                                                                    
returned  much greater  than 7.4  percent, but  the previous                                                                    
two  or three  years had  been unfavorable  to the  plan. He                                                                    
cautioned  that   projections  could   change  significantly                                                                    
depending upon the  experience to the plan on  the asset and                                                                    
liability sides. There could be  gains or losses on both the                                                                    
returns  and   liabilities.  He  discussed   the  retirement                                                                    
expectation  and explained  that if  people retired  earlier                                                                    
than  expected  it   would  create  a  loss   to  the  plan.                                                                    
Similarly,  if the  plan population  had  greater or  lesser                                                                    
life  expectancy  than  the standard  calculation  it  could                                                                    
cause a gain or loss to the plan.                                                                                               
Representative  Josephson clarified  that he  was asking  if                                                                    
the bill  did not add  substantially to the  20-year journey                                                                    
of paying down the unfunded liability.                                                                                          
Mr.   Kershner   answered   that  based   on   the   current                                                                    
calculations it was correct.                                                                                                    
Representative LeBon  surmised that  it could become  a very                                                                    
short journey  if the underfunded liability  in the existing                                                                    
plan was paid and thought it would help justify a new plan.                                                                     
HB 55 was HEARD and HELD in committee for further                                                                               
Co-Chair Merrick reviewed the schedule for the following                                                                        
3:33:18 PM                                                                                                                    
The meeting was adjourned at 3:33 p.m.                                                                                          

Document Name Date/Time Subjects
HB 70 HFIN DOT CAPITAL - 05.05.2021.pdf HFIN 5/5/2021 1:30:00 PM
HB 70
HB 55 Amendments 1-2 041121.pdf HFIN 5/5/2021 1:30:00 PM
HB 55