Legislature(2025 - 2026)ADAMS 519
02/27/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB53 || HB54 || HB55 || HB56 || HB85 | |
| Overview: Fy 25 Governor's Supplemental Budget by the Office of Management and Budget | |
| HB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 53 | TELECONFERENCED | |
| += | HB 54 | TELECONFERENCED | |
| += | HB 55 | TELECONFERENCED | |
| += | HB 56 | TELECONFERENCED | |
| *+ | HB 85 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
February 27, 2025
1:35 p.m.
1:35:48 PM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Lacey Sanders, Director, Office of Management and Budget,
Office of the Governor; Pam Halloran, Assistant
Commissioner, Department of Health; Lon Garrison, Executive
Director, Association of Alaska School Boards; Lisa Parady,
Executive Director, Alaska Council of School
Administrators; Tom Klaameyer, President, National
Education Association-Alaska.
PRESENT VIA TELECONFERENCE
Roy Getchell, Superintendent, Haines Borough School
District.
SUMMARY
HB 53 APPROP: OPERATING BUDGET; CAP; SUPP
HB 53 was HEARD and HELD in committee for further
consideration.
HB 54 APPROP: CAPITAL/SUPPLEMENTAL/FUNDS
HB 54 was HEARD and HELD in committee for further
consideration.
HB 55 APPROP: MENTAL HEALTH BUDGET
HB 55 was HEARD and HELD in committee for further
consideration.
HB 56 APPROP: SUPPLEMENTAL; FUND CAP
HB 56 was HEARD and HELD in committee for further
consideration.
HB 78 RETIREMENT SYSTEMS; DB OPT.
HB 78 was HEARD and HELD in committee for further
consideration.
HB 85 APPROP: SUPPLEMENTAL
HB 85 was HEARD and HELD in committee for further
consideration.
OVERVIEW: FY 25 Governor's Supplemental Budget by the
Office of Management and Budget
Co-Chair Josephson reviewed the meeting agenda.
HOUSE BILL NO. 53
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
making reappropriations; making appropriations under
art. IX, sec. 17(c), Constitution of the State of
Alaska, from the constitutional budget reserve fund;
and providing for an effective date."
HOUSE BILL NO. 54
"An Act making appropriations, including capital
appropriations and other appropriations; making
reappropriations; making appropriations to capitalize
funds; and providing for an effective date."
HOUSE BILL NO. 55
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
HOUSE BILL NO. 56
"An Act making supplemental appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
HOUSE BILL NO. 85
"An Act making supplemental appropriations,
reappropriations, and other appropriations; amending
appropriations; capitalizing funds; repealing
appropriations; and providing for an effective date."
1:37:01 PM
^OVERVIEW: FY 25 GOVERNOR'S SUPPLEMENTAL BUDGET BY THE
OFFICE OF MANAGEMENT AND BUDGET
1:37:05 PM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, provided a PowerPoint presentation
titled "FY2026 Governor Amended Budget: House Finance
Committee," dated February 27, 2025 (copy on file). The
presentation provided an overview of the amendments
th
transmitted on behalf of the governor on February 18 per
AS 37.07.070 that required requests to be submitted to the
th
legislature by the 30 day. She began with an updated FY 26
fiscal summary that incorporated the amendments submitted
the previous week (slide 2). The amendments included FY 25
supplemental requests and the FY 26 budget. FY 25 operating
supplementals totaled $40 million in all funds, including
$36.2 million in unrestricted general funds (UGF), for an
operating supplemental total of $453 million. The submitted
capital supplementals totaled a reduction of $1.9 million
with an overall increase of $500,000 UGF. The supplemental
total was $522.5 million of which $84.2 million was UGF.
The total brought the overall deficit to $157.8 million.
Ms. Sanders explained that the total numbers in the
presentation were a combination of the supplementals
presented earlier to the committee as well as the ones
presented the past week. The operating amendments in the FY
26 budget totaled $300 million in all funds, including
$32.3 million UGF. The capital supplementals totaled $12
million, including $11.6 million UGF, for a grand total of
$312 million in all funds and $43.9 million UGF. The
overall deficit was $1.56 billion (shown at the bottom of
the table on slide 2).
1:40:11 PM
Ms. Sanders moved to slide 3 titled "Operating Governor
Amend Requests" by agency. She noted there were detailed
spreadsheets in the back of members' packets with
additional information (copy on file). The amended budget
incorporated changes for the implementation of a department
of agriculture in FY 26 established in Executive Order (EO)
136. Two pieces had been submitted, including the transfer
of 37 existing positions and $7.2 million from the
Department of Natural Resources (DNR); and an addition of
$2.7 million for new positions and startup costs. She noted
there had been changes in the past several days and the
$2.7 million would be backed out to result in a neutral
cost for EO 136. The administration was reevaluating vacant
positions that could be utilized instead of adding to the
budget.
Ms. Sanders moved to operating amendment requests for the
Department of Administration (DOA) on slide 3. There were
two projects related to artificial intelligence (AI)
initiatives. The first was to offer Microsoft Copilot 365
to 2,000 state employees, allowing them to be more
productive in their work. The second was two short-term AI
projects for the Department of Environmental Conservation
(DEC) and DOA. The first was for DEC to improve its forms
and permitting processes through the use of AI and the
second was for DOA to utilize AI for payroll processes and
forms improvements. There were two significant adjustments
within the Department of Corrections (DOC).
1:42:45 PM
Representative Stapp asked about the Microsoft Copilot AI.
He remarked he had the free app on his phone. He imagined
the cost to the state would not be free. He referenced the
stated goal of improving performance and efficiency. He
asked if the administration was looking to eliminate
positions that would be unnecessary due to AI.
Alternatively, he wondered if the idea was to enable
employees to be more productive in their current
employment.
Ms. Sanders replied that the goal was to improve
performance for employees to ensure they could be more
productive. She elaborated that there were a lot of needs
in the state and things took time; therefore, it would be
beneficial if the timeliness of processing things could be
improved.
Representative Stapp asked what the employees would be
doing with the program.
Ms. Sanders responded that she could provide general
examples. One thing was processing paperwork. She
elaborated that currently people were filling out forms or
spreadsheets manually. She detailed that if the use of AI
could improve the processes and timeliness, it would be a
benefit to employees. She explained that it could slow down
processing time backlog.
1:44:34 PM
Representative Stapp asked where he could find the version
of the program the state would be paying for. He was
interested in looking it up and reviewing the capabilities.
Ms. Sanders replied that she did not have an answer on
hand. She would have DOA follow up with a response. She
continued with slide 3 and highlighted two significant
adjustments in the DOC budget. The first was related to
community residential centers (CRCs). She detailed that the
CRC contracts were recently finalized, resulting in an
increase of $1.4 million for FY 26. Additionally, there was
a technical correction throughout the budget that hit DOC
with a larger impact reflected as a $5.5 million change in
the "Other" column. When the budget was submitted there
were fund source changes associated with the Restorative
Justice Account or "felon funds" (incarcerated felons that
were no longer eligible to receive their Permanent Fund
Dividend (PFD)). The calculation used in the budget only
accounted for individuals who had actually applied instead
of individuals who were eligible to receive the PFD. The
technical correction fixed the amount of Restorative
Justice funds appropriated in the budget. The item showed
up in several places in the budget including the
legislature's budget or fund capitalizations for the Crime
Victim Compensation Fund. The correction ensured the budget
followed the statutory formula on the amount available for
appropriation.
1:46:49 PM
Representative Bynum referenced the AI component that would
cover 2,000 employees under the [Microsoft] licensing. He
stated that AI was a new space and a very powerful tool if
an employee was trained to use it effectively. He asked if
there was anything done prior to specify the program would
be launched with 2,000 employees as opposed to a smaller
group to determine if the investment increased
productivity. He pointed out that if an employee did not
understand the capabilities of the technology or did not
use the program, it would be something the state was paying
for that sat on a desktop and did not get utilized.
Ms. Sanders stated there were individuals currently using
the AI program to see what capabilities existed. She stated
that whether it was being documented in terms of the number
of users and how it was being used were "one off cases."
She explained that the increment would provide a tool and
resource to agencies to start the pilot project type
initiative to determine who could use it and where it could
be used effectively and efficiently. She stated there were
15,000 state employees and not every employee would need
Microsoft Copilot. She stated that a specific group of
individuals would be utilizing the program as a tool to
automate.
Representative Bynum asked if it would be available for
2,000 employees and departments would have the ability to
purchase the program or if it would be deployed out to
2,000 people without request.
Ms. Sanders answered that the Office of Information
Technology would have 2,000 licenses to work with agencies
to determine who would receive them. She continued to
review slide 3 and highlighted increments for DEED. The two
primary items were similar to supplementals submitted
related to the Alaska Performance Scholarships and the
Alaska Education grants to ensure there was sufficient
authority based on the passage of law in 2024 that
increased the number of eligible applicants and the dollar
value. She moved to an addition for the Department of
Environmental Conservation (DEC) to assume federal
authorization of the state program and administer and
enforce the dredge and fill permitting program allowed
under the Clean Water Act. The request was the first of a
phased approach and would provide five positions necessary
to develop the application process and start the
development of the regulations and guidance. The
administration recognized that five positions would not be
able to fully operate the program and it would be back in
the future years to discuss what the next steps would look
like under a fully developed plan.
1:50:43 PM
Ms. Sanders addressed the Department of Health (DOH) on
slide 3. The most significant change was under the Medicaid
program. She elaborated that Medicaid projections were
thth
provided on December 15 and February 12. There was an
addition of $19.6 million in match and $220.6 million in
federal receipts to bring the budget in line with current
projections. There were several items adding funding to the
base for the Division of Public Assistance (DPA) to
continue its efforts processing applications and ensuring
individuals receive timely application responses. There was
$8.2 million split between $4.1 million in match and $4.1
million in federal receipts to continue the virtual contact
center. The center handled approximately 20,000 to 24,000
eligibility calls per month. Additionally, there was a
request to add 15 permanent full-time eligibility
technicians to the base budget to continue processing
applications, renewals, and reports of change to public
assistance. The Department of Natural Resources (DNR) line
on slide 3 showed the transfer funding from DNR to the new
department of agriculture.
1:52:33 PM
Representative Stapp asked about the 15 permanent full-time
eligibility technicians. He asked if it was a lateral
transfer from the long-term non-permanent positions that
had been in the budget the last couple of years. He asked
for the current vacancy rate above the factor for DPA
technicians. He thought it had been on the high side.
Ms. Sanders answered it was an addition of 15 positions in
the base budget, not non-permanent positions moving
forward. The department had seen more success in filling
full-time long-term positions because of the job security.
The department had 14 vacant eligibility technicians and
the increment would bring the number to a total of 30 the
department would be attempting to fill in the next several
months. The hope was that the department could fill the
remaining 14 positions in the current fiscal year and the
next 15 in FY 26.
1:53:44 PM
Ms. Sanders moved to the Department of Public Safety (DPS)
on slide 3. The governor's amend request included a $1.6
million increase for the Village Public Safety Officer
(VPSO) program for the Northwest Arctic Borough. The
department had taken steps in the past several months to
fill and retain its VPSO position including arming
officers, providing increased salaries, addressing housing
needs, and costs associated with equipment. She noted the
request was included in the FY 26 budget and the FY 25
supplemental budget.
Ms. Sanders continued on slide 3 and reviewed the
University of Alaska line. The professional teaching
program was transferring from the University to DEED. She
noted that the slide did not show several pages included in
members' backup documents (copy on file). She explained
that the University submitted many transactions to align
with intent language submitted by the legislature in 2024
under AS 37.07.020(e) and had to do with reflecting annual
facility and maintenance operation and repair costs
separate from the other costs within their budget. She
noted that the items had a net zero cost. Lastly, under
debt service and fund capitalizations there were two
technical adjustments. The first was $1.3 million for the
school fund to align the budget with the revenue forecast.
The second was funding from the Power Cost Equalization
(PCE) fund provided to the Community Assistance Program.
Due to a miscalculation, the amount available was incorrect
by $163,700. The governor's amendment provided a technical
correction to the error.
1:56:12 PM
Ms. Sanders moved to slide 4 showing the FY 26 capital
budget amendment requests. There were two items for
Department of Commerce, Community and Economic Development
(DCCED) including a $2.7 million increase in federal
authority for the Alaska Energy Authority's Statewide Grid
Resilience and Reliability Project. There was also a
request for $600,000 to provide three organizational
grants. Alaska statute allowed organizational grants to be
provided when a new borough or municipality was created.
There was a pending election for the Hoonah Borough that
would receive the grant if it was certified.
Co-Chair Josephson asked Ms. Sanders to repeat the name of
the borough.
Ms. Sanders replied, "Hoonah." She noted there was
contingency language specifying that the money would not go
out if the certification was not complete.
1:57:29 PM
Ms. Sanders addressed a $1.5 a $1.5 million capital project
under DEED for the Mount Edgecumbe High School. The project
would provide for an elevator on the campus to bring a
facility up to ADA compliance. She moved to an increment
for DNR that was not included in the governor's original
budget for the Natural Historic Preservation Fund federal
grant program. She detailed it was a $2 million federal
grant program with a $1.3 million match. There was a phase
2 request for DPS for the Fairbanks trooper post renovation
completion. She elaborated that DPS received about $5
million to begin the two-phase renovation project. She
detailed that the requested $6.2 million was needed to
complete the project. There was a $2 million project under
DOT for the state managed seaplane base and harbor facility
maintenance. She explained that seaplane bases and harbors
were not covered under the state's deferred maintenance
program and significant electrical work needed to be
completed at several harbors in addition to other repair
needs.
Representative Stapp asked why the seaplane harbors were
not under the deferred maintenance umbrella.
Ms. Sanders answered that deferred maintenance included
things like buildings and things like state runways,
seaplane bases, and harbors were typically excluded. She
stated there could be a conversation about including those
items, but currently deferred maintenance was limited to
physical facilities. She noted that the list could grow if
the other things were added.
Representative Stapp asked if there were any other things
the state owned that were technically not facilities that
needed preventative maintenance and deferred maintenance.
Ms. Sanders answered state owned runways. She thought they
could come up with additional items as they worked through
agencies needing to do maintenance to their facilities.
2:00:53 PM
Ms. Sanders addressed FY 25 operating supplemental requests
on slide 5. The first item fell under DCCED and was a
reversal of $50 million requested in the fast track
supplemental to AIDEA. She explained that when the
appropriation was first submitted, timing on the final
investment decision (FID) was uncertain and anticipated it
could occur within the fiscal year. The timeframe was
revised and expected to take up to 24 months, which removed
the urgency surrounding the appropriation.
Representative Stapp asked if the legislature was still
supposed to backstop the funding or if the cost was being
pushed out into the future a couple of years.
Ms. Sanders responded that AIDEA had $50 million set aside
for the intended purpose. She stated her understanding that
the backstop was still in place based on what AIDEA had.
Representative Stapp asked if the state was not reimbursing
AIDEA anymore because AIDEA could use its own receipt
authority.
Ms. Sanders replied that no backstop would be provided at
the present time.
Representative Hannan understood the AIDEA reversal but
observed there was $225,000 remaining in other funding. She
asked what the increment pertained to.
2:03:12 PM
Ms. Sanders answered there was a separate item related to
AEA. She explained that when the budget was submitted, it
included a project submitted as a reappropriation for data
library administration hosting, expansion, and
digitization. After talking with LFD, it had been
determined the item was not a reappropriation and it should
have come from an emerging energy technology fund. The
increment was a $225,000 direct appropriation instead of a
reappropriation.
Representative Hannan asked if the fund lived within AIDEA
or AEA.
Ms. Sanders answered that it was AEA and separate from
AIDEA.
2:04:24 PM
Ms. Sanders advanced to the operating supplemental
increment for DOC on slide 5. There was a $7.5 million fund
source change from federal receipts to state general funds.
The change was also reflected in the FY 26 budget. A change
made by the U.S. Marshals resulted in fewer federal mandays
reducing federal collections in both fiscal years. The item
brought the budget in line with expectations of what would
not be collected. There was a $3 million request Department
of Family and Community Services (DFCS) similar to the FY
26 budget, to ensure continued operations at the Alaska
Psychiatric Institute (API). She detailed that the Centers
for Medicare and Medicaid Services (CMS) reduced the
disproportionate share hospital (DSH) allocations
nationally, which reduced the federal funds the state could
collect and required an increase of $3 million to continue
operations. She addressed items for the Department of
Health (DOH). The first was $5.9 million within DOH and the
second was $5.9 million under special appropriations. She
explained that DOH was officially notified by the U.S.
Department of Agriculture (USDA) regarding the state's FY
23 error rate for the Supplemental Assistance Nutrition
Program (SNAP). She detailed that the situation resulted in
a penalty of $11.9 million. There was an option for the
state to pay half of the penalty and invest the remaining
half in new investments to improve the state's processes.
The increment shown on the DOH line on slide 5 reflected
the investment for one-time technology improvements to
target increased efficiency, improve accuracy, and
streamline processes. She stated there was an appropriation
under the Department of Law (DOL) to pay the penalty of
$5.9 million. She elaborated that in May of 2021 the
Department of Health and Social Services experienced a
cybersecurity attack. As a result, the department reviewed
all lapsing balances to identify $10 million that could be
encumbered in the accounting system to address any
potential liability for fines incurred due to the event.
There was no longer a potential for a fine and the request
was to reappropriate the $10 million to meet a portion of
the reinvestment cost as well as the penalty due. The
proposal required $1.9 million to make up the difference
between the $11.9 million and the $10 million available in
the reappropriation.
2:08:08 PM
Representative Galvin stated it was the first time she had
heard about the state being fined by the federal government
for not being an efficient passthrough of federal funds for
SNAP.
Ms. Sanders agreed.
Representative Galvin asked when the state had learned
about the fine.
Ms. Sanders answered that she had learned about it one
month back. She stated it covered the applications for the
FY 23 time period.
Representative Galvin recalled that in 2022 and 2023 the
legislature had heard about the significant backlog from
the department and the legislature had asked what it could
do to help. She stated there was very little other than a
few positions that had been requested and a little help
with an old computer software system. She stated that she
was befuddled by the situation because the legislature had
made an earnest ask about how to address the situation. She
remarked that it was one thing to be worried about getting
fined by the federal government, but it was another thing
to know that children and families were needing food. She
understood the governor offered something through the Food
Bank that was helpful in an emergency situation. She noted
it was one-tenth of the funding going out through SNAP. She
stressed that it was the legislature's job to make sure
systems were fully funded in order for the implementation
to be thorough and efficient and certainly, so the state
did not get fined $11 million. She asked if they were
accomplishing what was needed. The legislature had recently
been told there was still a backlog. She was concerned that
the $6 million [going to new investments] was not enough
and that the state was getting fined. She was upset the
legislature was unable to do its job because it did not
have sufficient information to do it well and now the state
was getting fined. She found it deeply concerning.
Co-Chair Josephson shared the concern.
Ms. Sanders answered that there were investments made and
30 non-permanent positions added. There had been
significant adds in 2024 to stand up the virtual contact
center. Additionally, there were IT improvements and
funding, and the department was working hard to get the
changes implemented and available to residents. She
understood the concern with an $11.9 million fine. She
recognized it was a big number.
2:12:41 PM
Representative Galvin knew there were some options the
state could have taken to give out SNAP cards instead of
going through the backlog line. She highlighted that the
state had some options that other states were doing to
avoid getting fined. She wondered why Alaska had not made
the same decision, which would have avoided the current
situation.
Ms. Sanders answered that there were steps taken by the
state. She was not an expert in the area and did not want
to make inaccurate statements on the record. She deferred
the question to DOH.
PAM HALLORAN, ASSISTANT COMMISSIONER, DEPARTMENT OF HEALTH,
replied that the department shared the concerns. She
explained that the situation started prior to COVID-19 when
a previous director decided against doing all of the steps
required to certify, including the interview. In 2004
[2024] the department reported to the House Finance
Committee that it had opted to waive the interview process
in order to get food into people's hands. She elaborated
that it was a decision made by the department's leadership.
A couple of months after that time, the department had been
able to get caught up. In the meantime, there were a number
of improvements the department had made. She could follow
up with more detail.
Representative Stapp thought it was necessary to clarify
what was being discussed. He stated that the fine was due
to a payment error rate that occurred because the state
gave out food stamps to people who were not eligible (i.e.,
because there was a backlog, food stamps had been given out
to everyone, which was the reason the state was being
fined). He asked if his statements were accurate.
Ms. Halloran answered that they continued food stamps for
people who were already receiving food stamps. She
clarified that there had not been a free-for-all of handing
out food stamps. She elaborated that the stamps had gone to
eligible Alaskans. The department was required to recheck
eligibility and it opted not to in order to renew their
benefit.
Representative Stapp stated his understanding that the
state was required to check eligibility, but because of the
backlog the department had waived eligibility to ensure
people received food stamps. He asked for verification it
was the reason the state was being fined.
Ms. Halloran answered affirmatively.
2:16:38 PM
Co-Chair Foster thought it went back to his point that
there were not enough people processing the papers. He
stated that the fines went back to 2023 and his office was
receiving calls daily in 2024 and 2025 and there were not
enough people working in the division to process the
papers. He considered that if the fines were from 2023, he
foresaw there would likely be more fines coming in the
future. He was glad Representative Galvin had highlighted
the issue because it was likely one of the biggest things
his office had been dealing with. He provided history of
the positions. In 2021, the governor proposed cutting 101
positions in public assistance. The House had funded all
101 positions, the Senate had cut the funding back to 50
positions, and the governor vetoed all 101 positions. He
noted that 30 positions had been added back in the past
several years. He believed the FY 26 budget included a
proposal to cut $8 million and 30 positions. He asked Ms.
Sanders for detail.
Ms. Sanders answered that the $8 million was one-time
funding added in the budget the previous year. She
explained that one-time items were reversed out of the
budget. There was a request to add 15 permanent positions
back to the base.
Co-Chair Foster was glad to hear it. He had a meeting with
the commissioner about the topic and he understood she was
very supportive of trying to get it taken care of. He
stated that his heartstrings went out to the individuals
who had gone weeks and months [without food assistance]. He
shared that he had received an email from a constituent the
previous day stating that she had kids and had been unable
to get assistance for good. The constituent had asked how
they were going to eat. He felt like he wanted to send
money to the woman.
2:19:21 PM
Ms. Sanders continued addressing operating supplemental
requests on slide 5. She moved to the Department of Law
(DOL) and highlighted a $1 million multiyear appropriation.
She detailed that labor relations moved from DOA to DOL.
Formerly, there had been a multiyear appropriation to DOA
to contract for assistance with negotiations in the
bargaining unit agreements. The prior appropriation had
been expended. As labor relations was implemented in DOL
there was a request to bring back the $1 million
appropriation in order to move forward with getting
bargaining agreements done timely. There was a $1.6 million
request under DPS for the Northwest Arctic Borough's VPSO
program.
Co-Chair Schrage referenced the DPS supplemental and the
fact that the state had already hired VPSOs in the
Northwest Arctic Borough. He asked why the increment was in
the supplemental.
Ms. Sanders answered that it was a grant to the community
beyond the standard VPSO program. She explained that the
community had taken steps to expand the costs needed within
their VPSO program including increasing salaries, arming
VPSOs, and increasing the number. The grant provided
additional funds to the community due to its success in
growing the program and retaining officers.
Co-Chair Schrage thought the grant was generally given
first before communities hired officers and other
improvements. He was confused about why the community had
hired the VPSOs and the state was retroactively providing
the grant. He trying to understand the process better, but
he also expressed concern and asked if a community was able
to act on behalf of the state and obligate state funds
without the legislature having to appropriate the funds
ahead of time.
Ms. Sanders answered that the community took actions to
increase its program and it had an associated cost. The
community had asked for support in providing the program
and the increased cost was a result.
Co-Chair Schrage asked if the community communicated its
intent to do so ahead of time or if the state was only
notified after the action had been taken.
Ms. Sanders replied that she could not speak to what the
community did or did not do. The request had been brought
forward and public safety was a priority of the governor.
The administration wanted to see the VPSO program succeed
to ensure the needs of communities could be met.
2:23:00 PM
Representative Hannan asked if there would be an FY 26
amendment in the same amount.
Ms. Sanders replied there was an identical amount in the FY
26 budget.
Representative Bynum referenced the VPSO program and timing
for funding. He referenced Ms. Sanders's statement that
public safety was a priority of the governor. He asked
about the measure of success. He wondered if it was hiring
and retaining people or some other metric.
Ms. Sanders responded that the efficacy was evidenced by
the successful retaining and recruiting in the VPSO
program. She shared that the last she had heard from the
VPSO program and DPS was that all of the public safety
officer positions were filled. She highlighted it was a big
feat, especially in some of the rural communities across
the state. There had been a history of a lot of turnover in
the positions. She stated it was a success and public
safety was a priority of the governor.
2:24:52 PM
Co-Chair Schrage understood public safety was a priority of
the administration and that the Northwest Arctic Borough
had been successful in increasing VPSOs, which he believed
was a great thing. He voiced concerns about the way the
increment transpired. Given that public safety was a
priority of the governor's, he asked if the administration
was encouraging all communities to hire everyone they
could. He asked if there was an increment in the FY 26
budget to account for the hiring of some unknown number of
VPSOs. He asked how he was supposed to predict the costs
for the coming year if the legislature was informed of new
hires after the fact. He noted that public safety was also
a priority of his and he was encouraged to hear there were
new VPSOs; however, in a constrained fiscal environment he
was concerned the state was allowing action to take place
with no appropriation from the legislature and the
legislature was expected to foot the bill for the cost
after the fact. He stated his understanding that if the
legislature rejected the increment, the individuals would
be fired. He asked how to deal with it moving forward.
Ms. Sanders answered that it was a grant to the community.
She remarked that the legislature had the power of
appropriation and if the funds were not provided it would
be incumbent on the community to determine what moved
forward. She stated she would not say people were going to
get fired. There was a request in the FY 26 budget for an
additional 15 VPSOs across the state. The administration
was addressing the growth in the next fiscal year and was
continuing to see increases in the program. She clarified
that the request for FY 26 was either 10 or 15 positions.
Co-Chair Josephson recognized Representative Chuck Kopp in
the room. He asked about an Alaska Vocational Technical
Center (AVTEC) issue under the Department of Labor and
Workforce Development (DLWD).
Ms. Sanders answered that the increment pertained to a
recalculation of the Technical Vocational Education Program
(TVEP). There were additional receipts available for
distribution and the item showed up in DEED, DLWD, and the
University. She moved to fund capitalizations at the bottom
of slide 5. The first item added an additional $11 million
to the Disaster Relief Fund, bringing total requests for FY
25 to $29 million. The request for FY 26 was $13 million.
There were two significant increases and notifications
received recently including $15 million associated with the
Merbok storm on Alaska's west coast and an additional
increase for the Mat-Su winter storm. The total request
covered the costs associated with the storms and provided
$5 million to address any disasters in the next couple of
months. The second item was under the fire fund and
included $7 million to address the upcoming fire season and
$3 million for the closeout of the FY 2024 fire season.
2:28:38 PM
Ms. Sanders turned to capital supplemental requests on
slide 6. The two increments included a named recipient
grant to the Blood Bank of Alaska to finalize the
certification of the donor testing laboratory that would
flow through DCCED and a technical correction for the
Alaska Oil and Gas Conservation Commission (AOGCC) data
management project to break the project into two phases to
address receipts collected in the current year and receipts
utilized in a future year.
Co-Chair Josephson remarked that the state was not in a
position to afford the increments in the governor's amended
budget. He noted the total including the indebtedness was
about $150 million. He could think of one way to fund the
items. He realized the legislature was the appropriating
body and ultimately decided funding sources. He asked if
the administration had any other guidance or wanted to
participate in finding funding sources to pay the bills.
Ms. Sanders answered affirmatively. She stated that the
current proposed budget drew from the Constitutional Budget
Reserve (CBR). She relayed that the governor was willing to
have conversations about what the future may look like
recognizing that the current fiscal situation was not
looking great and there were limited resources to address
the various needs.
Representative Hannan referenced that the supplemental
capital request for the Blood Bank. She stated that the
entity had received state funds for the specific purpose
several years in a row. She asked if there were cost
overruns. She wondered why the item was a supplemental
request as opposed to an FY 26 capital request.
Ms. Sanders answered that it was to get funding to the
Blood Bank as quickly as possible in order to finalize the
project.
Representative Hannan asked if the Blood Bank had
underestimated the cost by $500,000 or exceed their
expected cost by $500,000. She highlighted that the
legislature had provided funding for the item for the past
three years.
Ms. Sanders answered it was the last piece of the total
request that was broken into three phases.
Representative Hannan stated it was a little frustrating.
She stated the legislature had been generous with the Blood
Bank, but no information was being provided about the
reason for the additional increment. She elaborated that
there had been numerous funding requests and the
legislature kept being told the facility would be open soon
and there would be testing in Alaska instead of paying to
ship [blood samples] out. She was confused about the reason
for a supplemental item. She underscored that it had not
been a year since the legislature appropriated money for
the final total cost of the project and now there was a
request for another $500,000.
2:32:33 PM
Representative Allard asked how to explain doing an $83.6
million supplemental in times of a deficit.
Ms. Sanders answered there were urgent needs to be
addressed such as the Disaster Relief Fund and the ability
to respond [to disasters]. There were currently reserves
available in the CBR to address the urgent needs of
Alaskans. She stated that trying to prioritize the needs
was not an easy task.
Representative Stapp was curious about the manday dispute
with the DOC and U.S. Marshals. He stressed that $7.5
million was a substantial number of mandays to not be able
to be billables. He asked whose responsibility it was when
related to federal prisoners. He would take the question
offline.
HB 53 was HEARD and HELD in committee for further
consideration.
HB 54 was HEARD and HELD in committee for further
consideration.
HB 55 was HEARD and HELD in committee for further
consideration.
HB 56 was HEARD and HELD in committee for further
consideration.
HB 85 was HEARD and HELD in committee for further
consideration.
2:34:03 PM
AT EASE
2:35:19 PM
RECONVENED
HOUSE BILL NO. 78
"An Act relating to the Public Employees' Retirement
System of Alaska and the teachers' retirement system;
providing certain employees an opportunity to choose
between the DB and defined contribution plans of the
Public Employees' Retirement System of Alaska and the
teachers' retirement system; and providing for an
effective date."
Co-Chair Foster began chairing the meeting. He explained
that the committee would hear invited testimony on HB 78.
2:36:15 PM
LON GARRISON, EXECUTIVE DIRECTOR, ASSOCIATION OF ALASKA
SCHOOL BOARDS, introduced himself. He thanked the committee
for the opportunity to speak in support of HB 78. He
relayed that the Association of Alaska School Boards (ASB)
board of directors adopted three legislative priorities for
the year and one of the priorities was retention and
recruitment of teachers, administrators, and staff. He
noted that the priorities and supporting resolutions of ASB
membership were appended to his written testimony (copy on
file). He detailed that ASB had consistently advocated for
a defined benefit (DB) program as the best choice for staff
retirement benefits. In 2005, ASB membership passed a
resolution and continued to strongly support the
reinstatement of a DB option (titled "Relating to a DB
Resolution"), which stated that ASB supported the
reestablishment of a DB retirement program that improved
the hiring and retention of highly qualified staff.
Mr. Garrison stated that school districts were grappling
with a persistent crisis in retaining qualified teachers
and staff due to inadequate funding, challenging work and
living conditions, and benefits that were often not
competitive with other states. The situation undermined the
capacity to deliver quality education to Alaskan students
and complicated school boards' efforts to meet the state's
obligation for public education each day. One of the most
crucial factors in a student's success was the quality of
the educator working with them. While effective learning
relied on having a high quality teacher, it was essential
for the entire school system to support the vital
interaction between a teacher and a student. He stated it
required assistance from a variety of school staff to help
in the learning experience. Thus, a wide variety of staff
would be affected by moving to a DB program.
Mr. Garrison continued that school boards statewide were
encountering unprecedented challenges in allocating rapidly
diminishing resources. The shortage of applicants combined
with insufficient funding led to staff shortages that often
worsened the situation. He relayed that an absence of a DB
retirement option hindered Alaska's capability to attract
and retain needed public service employees. Several
districts had to turn to the J-1 or H-1B visa programs for
the past few years to fill teacher vacancies with
international staff. Both of the programs had been used as
stopgap measures to fill teaching vacancies with qualified
professionals. The solutions were short term and may come
with significant risk depending on the federal
administration's perspective on immigration.
2:39:11 PM
Mr. Garrison stated that HB 78 aimed to reinstate a new
retirement system that encouraged educational professionals
to dedicate their careers to serving in Alaska. The bill
incorporated the lessons from the past, shared the risks
among participants, and established retirement age and
qualification standards that better align with current
needs. Additionally, the bill maintained current
contribution rates for school districts for Public
Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS), which was a positive development.
It was important to recognize that school districts,
municipalities, and boroughs continue to face challenges of
supplying the contributions when state and federal funding
was unpredictable and insufficient.
Mr. Garrison shared that a couple of years back during a
meeting facilitated by ASB between school board members and
legislators, a legislator asked a school board member about
the difference between spending and investment. School
board members often referred to investment in staff and
students. The board member replied that investment implied
an expectation of a beneficial dividend or outcome, while
spending was merely a response to an expense. The ASB
viewed a competitive and attractive DB program as an
investment in recruiting and retaining qualified staff,
which led to improved student outcomes. The ASB urged the
legislature to be responsive to the critical need. He
stated it was one tool in the toolbox to help
make Alaska more competitive in the public sector job
market and was an investment in students, communities, and
the state.
2:41:05 PM
Co-Chair Foster asked committee members to write their
questions down. He intended to hear from the invited
testifiers prior to questions. He thanked Mr. Garrison for
his testimony.
ROY GETCHELL, SUPERINTENDENT, HAINES BOROUGH SCHOOL
DISTRICT, HAINES (via teleconference), thanked the
committee for the opportunity to testify in support of HB
78. He was proud to be testifying and had lived in Alaska
for seven years. He noted that he also served on the board
of the Alaska Superindendents Association, the Alaska
Council of School Administrators, and SERRC, Alaska's
Educational Resource Center. He relayed that like everyone
on the room, he cared deeply for the children of the state.
He stated that in his view, restoring a DB retirement plan
was a crucial part of the conversation on improving the
lives and futures of Alaska's students through the
education system. He highlighted that when he became the
superintendent in 2018, 14 staff members (about 25 percent)
were on a DB program that was similar to the plan under
consideration. Since that time, five of the individuals had
retired and nine were still employed by the district. None
of the individuals left for another district and all of the
positions the individuals left had turned over at least
three times. Meanwhile, certified staff leaving the
district averaged about 30 percent over the past two years.
Mr. Getchell shared that education ran deep in his family.
He detailed that his wife had spent her career teaching and
was currently a third grade teacher in Haines. His oldest
daughter is a kindergarten teacher in Colorado and his
youngest daughter was currently studying in South Dakota to
become a teacher. He spoke to the understanding of
supporting educators and ensuring they had the resources,
stability, and support to succeed. He had encouraged his
oldest daughter to consider teaching in Colorado largely
because of the availability of a DB retirement plan that
would provide her with long-term financial security. He
underscored that the stability a DB plan offered was
invaluable.
2:45:03 PM
Mr. Getchell relayed that he and his wife had taken a hard
look at their personal financial situation, particularly
related to their preparation for retirement. They had come
to a difficult conclusion that it was not feasible to
envision their future in Alaska. For example, after nearly
six years of service in Alaska, his wife accumulated just
over $65,000 to her retirement account, $35,000 of the
total came from her contributions. They were grateful for
every dollar, but it was not enough to provide for the next
stage of life. They determined that in order to secure the
retirement they needed, they would need to move back to
Colorado where they were both vested. They had briefly held
out hope in 2024 when SB 88 seemed like it may offer a path
forward, but the bill did not progress. He shared that he
had been reluctant to testify during the current meeting;
however, he felt compelled to share his family's story. He
was not comfortable being an example, yet the reality his
family faced should not be overlooked. He believed it was
not different than many conversations occurring among
Alaska's educators. He had great respect for Alaska and
highlighted all of the things his family had gained from
living in the state. He hoped sharing his experience could
help contribute to the broader conversation about why
reinstating a DB retirement plan for Alaska's educators and
public employees was crucial for the state's future. He
thanked the committee for the opportunity to testify.
Co-Chair Foster thanked Mr. Getchell for his testimony. He
asked to hear from the next invited testifier.
2:47:45 PM
LISA PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL
ADMINISTRATORS, JUNEAU, thanked the committee and shared
that the Alaska Council of School Administrators (ACSA) had
been formed over 50 years ago and was a private nonprofit
committed to supporting public education in all public
schools including neighborhood schools, charter schools,
and correspondence schools. The organization also
represented all superintendents, elementary and secondary
principals, school business officials, and educators. The
organization had recently been asked by the Department of
Education and Early Development (DEED) to create a center
for retention and recruitment because it was an emergent
crisis in Alaska. She noted that the current recruitment
and retention crisis was the worst the state had ever seen
against the backdrop of the worst crisis the country had
ever seen for educator shortage.
Ms. Parady provided a PowerPoint titled "HB 78: Retirement
Systems; DB Option Alaska's Educator Recruitment and
Retention Crisis" (copy on file). She began with a map of
Alaska on slide 2 reflecting the school districts across
the state. She underscored that ACSA represented all of the
school districts and legislators had a duty to each of the
students in the districts. She stated it was necessary to
find the path forward working together on recruitment and
retention of educators. She moved to slide 3 and
highlighted that legislators had each received a copy of
the ACSA joint position statements at the beginning of
session. The documents were a compilation of the priorities
of all ACSA members. The documents included information
about ACSA's commitment to a DB retirement plan. She
referred to language on the slide indicating that the lack
of a DB retirement plan, coupled with the loss of
competitive salaries and increased cost of living,
prohibited educators from being able to afford pursuing a
career in Alaska.
Ms. Paraday turned to slide 4 showing first day certified
position vacancies in 2025 provided by DEED. She noted that
there were approximately 7,000 teachers at present. She
moved to slide 5 and shared that the Alaska Educator
Retention and Recruitment Center (AERRC) was working on
several strategies.
2:51:13 PM
Ms. Parady referenced the governor's taskforce and one of
the substantial issues was competitive salaries. She
highlighted there had been a presentation by Institute of
Social and Economic Research (ISER) in the House Education
Committee the previous day. The presentation indicated that
salaries in Alaska were 25 percent below the national
average when adjusted for cost of living differences. She
stated lower salaries combined with a lack of DB was part
of what was driving the turnover. She relayed that AERRC
was working on Alaska teacher placement to help districts
and it was working to smooth out the processes associated
with international hire. Approximately 66 percent of the
teachers applying through Alaska Teacher and Personnel were
international hire. She believed the number was staggering.
She discussed Teacher Retention and Recruitment (TRR)
implementation and explained that extensive surveying had
been done of over 4,000 educators across the state. Slide 6
showed rankings from the survey and retirement benefits was
the number 1 issue for current administrators and the
number 4 issue for all educators following compensation,
positive workplace conditions, and personal connections
with students.
2:52:37 PM
Ms. Parady addressed slide 7 showing the survey rankings of
all 34 solution influence items from the governor's TRR
workgroup that had resulted in the TRR Playbook that
included a number of strategies ACSA would try to support.
She highlighted the number of items in the top 10 (out of
34) specifically related to the importance of a DB plan.
Ms. Paraday turned to slide 8 and addressed reasons
teachers were leaving Alaska:
Top 4 Reasons
1. Lack of DB
2. Better opportunities in the lower 48
3. Cost of living
4. Uncertainty of education funding
Ms. Paraday elaborated on the slide and pointed out that
educators had the ability to go anywhere in the country and
find a job. She remarked that the previous week
Representative Bynum had referred to the uncertainty of
education funding as the pink slip cycle. She stated that
educators felt the impact of the uncertainty.
Ms. Paraday spoke to slide 9 titled "How does turnover harm
student achievement?" She stated that "we are all
accountable to it" and wanted to support students to have
increased student achievement. The slide showed statistics
provided by ISER showing that high teacher turnover
correlated with poor student achievement. In the five
lowest turnover districts the average percent of students
scoring proficient in reading was 85 percent. While the
average in the five highest turnover districts was 46.9
percent. She was happy to provide additional data on
request.
Ms. Parady turned to slide 11 showing what she referred to
ask the "PK-12 instability equation." She pointed to an
image showing the faces of superintendents in Alaska. Faces
covered by blue hearts indicated the individuals were no
longer in the position. Faces covered by yellow hearts were
leaving in the current year, and those with purple hearts
had moved from one district to another within the state.
She pointed out that superintendent turnover impacted
principal turnover and principal turnover impacted teacher
turnover. She stated that the combination resulted in
instability. She stressed the importance of stabilizing
districts for students. She stated that a DB plan was a
piece of the solution. She closed on slide 12 showing an
image of a flier from another state discouraging educators
from teaching in Alaska because Alaska did not have a DB
retirement program. She noted the flier was from a booth at
a job fair. She emphasized the solution was offering a DB
option to educators, which would help close the gap. She
stated there was no silver bullet that would turn the trend
around. She highlighted that all of the strategies in the
TRR Playbook combined with the passage of a DB option and
salary increases would make a difference. She stressed that
the tide could be turned, and leadership had to do it
together. She thanked the committee.
Co-Chair Foster thanked Dr. Parady. He moved to the next
testifier.
2:57:37 PM
TOM KLAAMEYER, PRESIDENT, NATIONAL EDUCATION ASSOCIATION-
ALASKA, introduced himself as the president of the National
Education Association-Alaska (NEA-Alaska), Alaska's teacher
and support staff union. He provided a PowerPoint titled
"Public Pensions Improve Our Schools, Communities, and
Student Outcomes" (copy on file). He stated that students,
families, and the economy needed a high functioning and
sufficiently resourced public education system. He was
present to make the case that HB 78 was a smart investment
for the state and its public employees. The bill was a
commonsense solution to retain educators, thereby directly
improving student learning and achievement, improving
schools, and strengthening communities. He stated that
Alaska arguably had the worst retirement system in the
country for educators. Alaska's system was the only system
that did not offer a pension or Social Security for
teachers. He relayed that out of the states that had failed
experiments of abandoning pensions, only Alaska remained
committed to the broken system; all of the others had
returned to some form of pension.
Mr. Klaameyer turned to slide 2 showing a chart of teacher
retirement offerings from March 2022. He stated that not
only did Alaska have the worst retirement system in the
country, but it was also driving the worst educator
turnover in the country as a result. The national average
for teacher and principal turnover was about 10 percent
whereas Alaska's teachers were leaving the state and
profession more than double the rate. The turnover was even
higher for administrators. Turnover was also high for
education support professionals. He pointed out that many
of Alaska's rural districts had an average turnover rate
exceeding 50 percent. He noted the AERRC website currently
showed hundreds of vacant positions at schools across the
state, despite being partway through the school year when
there should be very few or no vacancies. He asserted that
the number of vacancies was actually much higher when
factoring in the removal of positions because they had not
been filled or in anticipation of budget cuts, and
positions filled temporarily by poorly trained long-term
substitutes. The problem was not only due to an educator
shortage. He explained that the state had failed to fund
schools and provide a retirement system to attract enough
highly qualified educators. He had recently learned there
were over 15,000 certified educators in Alaska and only
about 8,000 were choosing to work in the school system.
3:01:37 PM
Mr. Klaameyer turned to slide 4 and highlighted that
student success was highly correlated with teacher
retention. He believed it was commonsense knowledge that
experienced educators led to better outcomes for students.
He addressed a review of the research titled "Does Teaching
Experience Increase Teacher Effectiveness?" [a review by
Tara Kini and Anne Podolsky with the Learning Policy
Institute from June 2016] on slide 5. Research showed that
teaching experience made a real and positive impact on
student achievement. He detailed that most of the gains
were made during the early years as teachers were learning
their craft, but gains continued throughout their career.
The positive impact expanded to areas like school
attendance.
Mr. Klaameyer stated that because experienced teachers
developed close connections with students and families,
they knew how to better address issues and could help
combat problems such as chronic absenteeism. He stressed
that Alaska's high turnover rates robbed students of having
as many experienced teachers as they deserved whether from
high quit rates or budget issues that regularly caused
employees to be displaced, transferred, or pink slipped
rather than allowing them to build expertise in the same
grade level, subject, school, or district. He relayed that
the stability and effectiveness of teacher retention had
benefits beyond their own classrooms. When teachers were
able to stay put, their professional networks were
strengthened, they developed deeper collegial
relationships, more effective collaboration, and more. As a
result, students of long time teachers improved, and
colleagues improved as well.
3:04:20 PM
Mr. Klaameyer turned to slide 10 and highlighted the direct
connection between teacher turnover and student success. He
underscored that the best student improvement tool was
teacher retention. He advanced to slide 11 and stated that
Alaska educators had been supporting the effort to restore
a modest pension for close to two decades. He remarked that
the alarm had largely been ignored, which had resulted in
the current crisis. He explained that some of the state's
best and brightest educators took a careful look at long
term planning and retirement strategies early in their
career. He noted that the current legislature was the third
legislature to consider a shared risk pension such as HB
78. He knew many educators who continued to wait and hope
for the legislature to do the right thing and many more who
had given up and left the state or profession. He shared
that his son in law was currently working to become an art
teacher in Washington and had no plan to return to Alaska
because of the lack of a pension system.
Mr. Klaameyer emphasized that the time to act was now. He
stated that evidence was clear that pensions improved
retention and represented the most efficient investment of
retirement contributions and kept more money in Alaska
while saving school districts money. He turned to slide 12
with a graph showing that quit rates were much higher in
defined contribution (DC) plans. The green line was for men
and the blue line was reflective of women. The zero line
reflected the quit rate being exactly the same whether in a
DB or DC retirement system. Everything above zero
demonstrated that the quit rates for individuals in a DC
plan were higher than those in a DB pension. The chart
showed that people were less likely to stay in a job with a
DC plan at every stage in their career. Slide 12 showed
data from a study paid for by the State of Alaska as part
of the TRR working group done by the National Institute of
Retirement Security. He highlighted that in the early years
as teachers were learning their craft the quit rates
between DB and DC participants was not too dissimilar.
After individuals were vested in the DC plan in Alaska
(after five years), there was a substantial spike in
teachers leaving the state.
3:08:41 PM
Mr. Klaameyer looked at data from the Alaska Retirement
Management Board (ARMB) on slide 13 showing that $100
million was leaving the state with what he termed
"educational tourists." He stated that if it was major
league baseball, Alaska would be the farm team for the rest
of the U.S.
3:09:13 PM
Mr. Klaameyer advanced to slide 14 titled "Saves Alaska
Money." He remarked that the fiscal note was typically
limited to the direct costs to the state. He asked the
committee to consider all of the costs borne by the state
either by individuals or districts. The slide included
information from a study showing the cost was about $20,000
to replace a teacher that left and $20 million total. He
noted the study was almost 10 years old. He suspected the
number was much higher. He stated that if the number of
teachers leaving was significantly reduced, it was money
districts would save, which would offset any fiscal note
associated with HB 78.
3:10:08 PM
Mr. Klaameyer turned to slide 15 "A Better Bank for
Alaska's Buck." He stated that pensions had been
demonstrated to be a better bang for the buck. He offered
to provide a report shown on the slide titled "A Better
Bang for the Buck 3.0." He stated that individuals invested
in a DB plan had lower fees, economies of scale, and an
asset allocation separate from individual lifespan;
therefore, they earned more money in total because of the
pooling of a pension. He remarked that Wall Street liked
DC-type plans because it could charge each individual for
management fees.
3:11:28 PM
Mr. Klaameyer concluded the presentation on slide 16 titled
"Solution: House Bill 78." He stated that the modest
pension in HB 78 was an elegant solution to the problem. He
stated it was the highest leverage tool that could be used
to improve outcomes for students and improve schools and
strengthen communities and the state economy. He thanked
the committee.
Co-Chair Foster thanked the presenter.
3:12:46 PM
Representative Stapp remarked that Mr. Klaameyer's
predecessor had sent him an email recently about the fact
that TRS members, especially certified teachers, did not
have access to Social Security. He noted that the federal
government recently eliminated the Social Security Windfall
Elimination Provision (WEP). He asked if Mr. Klaameyer had
any comments on the topic.
Mr. Klaameyer answered that the repeal of Government
Pension Offset (GPO) WEP had been a godsend for employees
impacted by the situation. He was not impacted by the
change, but he had a TRS tier 2 pension and had worked his
entire career in Alaska. He stated that many teachers who
worked on the weekends, summers, or had careers before or
after their teaching career were impacted. He remarked that
it was terrible that people were dinged for public service.
He happy to see the congressional bipartisan effort to
repeal of GPO WEP penalties.
Representative Bynum noted that Mr. Klaameyer made a
reference to hiring poorly trained teachers in Alaska's
schools. He asked what Mr. Klaameyer meant that poorly
trained people were being hired to teach kids in Alaska.
Mr. Klaameyer answered that because of persistent vacancies
schools were put in a position where they needed people. He
had seen a decline in the standards of individuals coming
into school buildings to be in front of students. He was
talking specifically about emergency certified teachers,
those who had not yet completed all of the requirements to
be a certified teacher. By definition, the individuals were
trained less than a teacher who had gone through the
certification process. In many cases, the individuals were
at the tail end of their training and were doing their
student teaching. He explained that when a person was
learning to teach, they needed a mentor teacher as a guide.
He stated that allowing teachers in classrooms during their
student teaching meant they were the teacher of record at
the same time, which he believed was a disservice to the
individual and the students. He stated they may eventually
become good teachers, but he thought the individuals were
underqualified to be the teacher of record.
Mr. Klaameyer continued to answer the question by
Representative Bynum. In the other case, there were
positions were being filled with long-term substitutes
without any teaching credentials. There were background
checks and school districts vetted people to a different
degree in each district, but they were individuals who were
not necessarily trained to be teachers who were filling in
on a long-term basis. He noted that substitutes were also
used for paraprofessional positions and down the line. He
noted that the substitute pool in rural areas was not deep.
He elaborated that if a teacher retired and the district
could not replace them, they grabbed the best person
possible. He stated that often it was a very good
paraprofessional, but they were undertrained and poorly
qualified. He did not mean any disrespect to anyone. He
believed systematically there were many adults in front of
children who were not as highly qualified as students
deserved if the state wanted to improve student outcomes.
3:18:18 PM
Representative Bynum thought it was very concerning and
thought it should be a conversation legislators had with
DEED. He was alarmed by the comments. He noted that
testifiers had stated that they wanted to return or go back
to the DB plan. He did not believe the plan proposed in HB
78 was comparable to the previous DB plan and it did not
provide the protections of the previous plan. He asked what
it meant when testifiers said they wanted to go back. He
stated it was possible to put a terrible DB plan out that
did go back [to a prior plan]. He was trying to understand
what people contacting his office meant when they said they
wanted defined benefits.
Mr. Klaameyer replied that 10 different educators may have
10 different answers. He elaborated that there had been
bills in the past 20 years to go back to the TRS tier
2/PERS tier 3 system. He thanked Representative Bynum for
pointing out that HB 78 was not that plan. He noted that
the previous session when Senator Cathy Giessel was
promoting SB 88, she clarified it was not the same as an
old plan. Some people had referred to the model in HB 78 as
a skinny retirement or a hybrid. He characterized the bill
as a smarter, better retirement. The biggest criticism of
the old system was the unfunded liability, which was
exacerbated when the plan was closed because there was no
money going into the plan. The bill added cost sharing and
risk sharing mechanisms. He stated that he wished it was
possible to return to some improved health benefits like he
would enjoy in his retirement, but it would be a nonstarter
for the bill. He agreed it was necessary to define what a
defined benefit was under the bill. He referred to HB 78 as
a modest pension because it was not everything that
everyone would want. The state had studies that had
demonstrated the performance of the state's DB plan was
greater than the DC plan. He concluded that even though it
was a modest pension, it was better than the DC plan.
3:21:44 PM
Representative Hannan spoke highly of Haines Superintendent
Roy Getchell. She shared that Mr. Getchell had come to
Alaska in 2018 into a community that was notoriously
divided on every issue. She stated that Haines was very
engaged and 50/50 on every local issue. She elaborated that
immediately after becoming superintendent, Mr. Getchell was
faced with COVID implementation in a small town. She
discussed that there had also been a fatal mudslide in 2020
that killed two individuals including a first year
kindergarten teacher raised in the community. Mr. Getchell
had been faced with telling the classroom about their
teacher's death. She elaborated that he had to bring
stability to the school and community and had served as an
extraordinary leader among educators in Alaska and had been
named superintendent of the year in 2024. She highlighted
that when Alaska lost superintendents like Mr. Getchell it
had an impact on those working for the person. She relayed
that Haines was considered to be a good community to be a
teacher and was a great place to live. However, the
community had six superintendents in six years prior to Mr.
Getchell's arrival. She found it heartbreaking that both of
his daughters were seeking careers in education in other
states. She hoped legislators remembered people like Mr.
Getchell and his family because Alaska needed
superintendents and teachers who had grown up in the
communities, staying in the communities, and able to be
economically successful as lifetime educators in the state.
She communicated to Mr. Getchell that he would be missed.
3:24:29 PM
Representative Galvin directed a question to Ms. Parady.
She echoed Representative Hannan's comments about gratitude
and sorrow for what the state would miss. She looked at
slide 8 of Ms. Parady's presentation showing the top four
reasons teachers were leaving. She noted that the top
reason listed was the lack of a DP plan. She how many
people had been included in the survey and when it had been
conducted.
Ms. Parady replied that the survey had been administered by
ACSA and given to its members. She relayed that principals
tended to be responsible for hiring teachers; therefore,
ACSA wanted to hear from them on why teachers were leaving.
She could follow up with the numbers.
Representative Galvin asked if the survey included rural
and urban areas.
Ms. Parady responded that the survey was statewide
including rural and urban school settings. She noted it had
been a good turnout, but she did not have the number off
the top of her head. She would follow up with the
information.
3:27:21 PM
Representative Stapp appreciated Mr. Getchell's work and
the positive attitude he brought to the conversation about
education. He directed a question to Mr. Garrison. He asked
about the current rate of employer contribution that school
districts paid for a retirement plan as a percent of
salary. He believed it was the same across the state.
Mr. Garrison replied that school districts paid 12.5
percent.
Representative Stapp asked about the current contribution
rates employees paid as a percent of their salary.
Mr. Garrison responded that did not have the information on
hand.
Representative Stapp stated he looked up the teacher
contribution rates in Colorado. He relayed that teachers in
Colorado paid 8.38 percent of salary and school districts
paid 23.59 percent of salary. He asked how many school
districts in Alaska would be willing to pay 23.5 percent of
salary compared to the 11 percent they currently paid.
Mr. Garrison answered it would be a heavy lift. The number
was close to what municipalities paid. He stated there
would have to be an honest conversation about how it would
happen and whether districts would be able to afford it. He
relayed that it came down to the pie the funds were drawn
from and how to make it happen.
3:29:33 PM
Representative Bynum asked what had stopped school
districts from taking on the issue themselves and
recognizing there was a problem. He noted that districts
could enable teachers to jump into social security. He
elaborated that districts could step up and say they
understood the issue was so important that they would pay
teachers because they wanted qualified teachers and school
districts were going to figure out how to solve the
problem. He stated that the story was that the legislature
had not "done this for us."
Mr. Klaameyer replied that it was a very complex answer. He
stated that when narrowing the reason down to one thing,
the answer was funding. He expounded that school districts
were in the precarious position of having no mechanism to
raise revenue and they were required to have a balanced
budget. He noted that budgets were increasingly tight and
resulting in cuts to programs and schools. He reported that
two-thirds of the bargaining units were in some stage of
bargaining and each one was stalled due to funding. He
thought districts saw retirement as a state issue that was
out of their control. He thought school districts focused
on trying to improve the workplace, benefits, and salaries;
however, the packages they were offering were not
competitive because their backs were against a fiscal wall.
He did not see state finances changing anytime soon. He
elaborated it was the reason for talking about an
investment in the retirement system that was cost neutral
to the state as a whole. He remarked that it may not be
cost neutral to the state, but the investment by the state
would save districts money on recruitment and retention,
which would allow districts to fund student programs,
better benefits, and better compensation.
3:32:52 PM
Representative Bynum pushed back on the statement that
school districts did not have the ability to raise funds.
He agreed the statement was true pertaining to Regional
Educational Attendance Areas (REAA). However, city and
boroughs had the opportunity to collect above and beyond
the state aid. He asked how many districts were funding to
the cap as opposed to those that were not.
Mr. Klaameyer deferred the question to Mr. Garrison or Ms.
Parady.
Mr. Garrison replied that he did not know the specific
number of districts that were funding to the cap. A
significant number of districts that did, but there were a
number of districts that were not able to do so. He would
have to follow up with the number. He responded to
Representative Bynum's previous question. He did not know
if there was a statutory limitation on why districts would
not be able to do so. He asked Representative Bynum whether
the borough in Ketchikan had the capacity to do a
retirement plan on its own.
Representative Bynum answered that the borough had the
ability to do it if it so chose, but when it came down to
it, it came down to dollars. He shared that in Ketchikan
where he had been on the assembly, the borough had been
covering the cost of health insurance for the school
district at a cost of millions of dollars. There was an
ability for the borough to help the school district with
additional dollars and fund to the cap to the school. He
stated that the school board and district set policy for
how they hired people, how contracts were done, and how pay
raises were established. When he had been on the Ketchikan
Assembly, he had asked why the school district and its
employees had not opted into Social Security. He stated the
bottom line was they did not want to take on the
responsibility of the 6.2 percent cost.
3:35:41 PM
Ms. Parady answered that REAA districts did not have the
option. She believed there were 19 REAA districts, which
was a significant number. She believed the state had the
responsibility to address the issue in those cases. She
appreciated the idea of districts doing what they could to
help educators, but she agreed fully with Mr. Klaameyer
that they were doing so in many different ways. She
believed everyone viewed it as a state obligation and
historically it had been. She shared that ACSA had worked
for years with the state's Congressional delegation to get
the Social Security Act passed. She stated that everyone in
the delegation were elated that the act would provide some
relief. She believed districts were doing everything they
could to support educators. She thought the state had
excellent educators, but with the amount of constant
turnover, educators did not gain the time and experience
with students. She agreed that the education community
needed to help itself and she believed ACSA was looking at
numerous strategies to do so; however, it also needed help
from the state. She clarified that the package in HB 78 was
not the same [as the prior DB plan], but some package would
help Alaska become more competitive.
3:38:13 PM
Representative Bynum believed that at the end of the day
reform was needed in the state retirement system. He asked
what the plan would cover, how much it would cost, and who
paid. He wanted to make sure teachers were well
compensated, had good retirement plans, healthy work
environments, the necessary resources, and good schools to
teach in. He stated it was something the legislature could
help with and there was also some responsibility on school
districts to help. He was interested to know how the bill
would help achieve a good retirement system for teachers
and other state employees. He appreciated the testifiers'
participation in the current meeting.
3:39:32 PM
Mr. Klaameyer agreed that everyone was in the situation
together. He shared that his roots were in the Anchorage
School District (ASD). He thought it sounded like
Representative Bynum had been very supportive of the
Ketchikan School District during his time on the assembly.
He reported that the ASD taxed to the cap. He had been
around during times where the Anchorage assembly had been
more and less supportive to the school district when there
was cost sharing and cost shifting. He explained that just
like the borough and assembly were sometimes pitted against
each other, the state and local school districts were
sometimes pitted against each other. He agreed that "we're
all in this together and we're looking for a collective
solution."
Representative Allard acknowledged Mr. Getchell and
remarked that they had some great conversations. She noted
her daughters were both born in Colorado Springs. She
directed a question to Mr. Klaameyer. She asked why NEA-
Alaska had not enacted a retirement program for its members
like the IBEW [International Brotherhood of Electrical
Workers] or other unions.
Mr. Klaameyer answered that he would have to speculate
because he had not been involved in conversations on the
subject. He noted that the subject had not been broached
during his presidency. He believed it was the state's
responsibility. He noted there was a state system that was
working and did so. He thought the issue was too big for
NEA-Alaska to do alone. He highlighted that the state had
the ability to pool all public employees together. He had
tried to keep his testimony within the education field, but
one of the benefits of having a statewide pension was that
it was a larger pool with larger economies of scale and
lower management fees. Additionally, the state had
experience [with retirement plans] and it was easier to let
it continue than trying to reinvent the wheel.
Representative Allard stated she did not hear an answer to
her question. She did not know why the NEA-Alaska would not
want to form a third-party contribution or plan for
teachers like the IBEW or other unions.
Mr. Klaameyer believed the endeavor would be too big. He
did not believe NEA-Alaska had the resources to properly
manage a plan for teachers. He added that it would mean
NEA-Alaska would have to hire money managers. He pointed
out that the state already had the Alaska Retirement
Management Board (ARMB) serving as a manager with fiduciary
responsibility [for the retirement plans]. Additionally,
the state had the Division of Retirement and Benefits and
the Department of Revenue, which made up an infrastructure
that NEA would not be able to avail itself from. He added
that it would take away NEA-Alaska's primary duty of
supporting its members and advocating for students.
Representative Allard encouraged NEA-Alaska to look at
providing a retirement program. She thought it was the
organization's responsibility to make sure teachers stuck
around.
3:43:55 PM
Co-Chair Josephson addressed the topic of local
governments/home rules that made contributions and were
required to do so then also developing their own retirement
systems. He highlighted that based on inflation the state
was $450 million short of where it should be in the
foundation formula. He considered the idea that cities
would be put in a further position of individually
developing retirement systems at a time when the state was
underfunding education. He was trying to figure out how
that would work. He pointed out that many of the cities
were already spending at the cap and some had gotten into
trouble for overspending because of a lack of state
contribution. He asked for verification that city
contributions were there were resources to do so, there
were statutes that required it, and due to underinvestment
from the state.
Mr. Garrison replied that school districts were not
subsections of local boroughs and cities. He relayed that
school districts were elements of the state and part of
state government. He elaborated that school boards were
locally elected state officials and school districts were
established in local communities to carry out the
responsibility of the legislature to provide a public
education for every child. He explained that Alaska was one
of the only states where a school board and school district
had no revenue generating authority. As such, school boards
and school districts had to depend entirely on the state,
federal government (e.g., impact aid), or local
contribution. When school districts were established and
municipalities, cities, and home-rule cities came into
being, the foundation formula accounted for that, and an
agreement had been made that locally organized areas would
be participants in supporting public education. He
expounded that they had an opportunity to generate tax
revenue, primarily through property tax. There was a
minimum amount generated 2.56 mills on behalf of every
local community to support their contribution to state
education and funding. He thought it was a critical piece
to bear in mind in terms of how things worked and what
school districts were able to do.
Mr. Garrison was intrigued by Representative Bynum's
question about whether school districts could do something
on their own and he agreed with Mr. Klaameyer that the size
of the particular pool for an individual school district
would be small. He was working on something for his own
organization to redo its retirement plan and it was
difficult and could be very expensive. He reiterated that
school districts were an element of the state and not a
sub-element of locally organized government.
3:48:25 PM
Representative Tomaszewski thanked the presenters for being
present. He stated that Alaska employees including public
safety and teachers did not participate in Social Security.
He noted that Alaska had elected to implement a
Supplemental Benefit System (SBS) instead. He elaborated
that almost all of PERS employees participated in SBS, an
additional 12.26 percent. He noted that the teachers had
chosen not to do so. He was not sure why. He remarked that
SBS was better than Social Security because a plan holder
could direct where the money was invested and retained the
principal amount upon retirement. He was flabbergasted that
teachers were not participating in SBS. He asked why that
was the case and whether they may want to do so in the
future.
Mr. Klaameyer answered that there were many ways to get to
retirement security. He shared when looking at the lessons
of the past 20 years, NEA-Alaska firmly believed that the
return to a DB plan provided the biggest way get there at
the lowest cost. In the case of Social Security, teachers
chose not to participate because the benefits at the time
in the state system were sufficient and there was some
speculation over whether Social Security would still exist
when they retired. He was less familiar with the SBS
discussion, although he had never heard that educators
chose not to participate. He had always heard it was never
offered. He relayed that NEA-Alaska would certainly be
willing to entertain the idea. He believed it had its own
obstacles and the fiscal note for the additional 12 percent
was higher than what HB 78 would cost. He elaborated that
it would shift the payees, and SBS would be less to the
state and more to employers and employees. In a climate of
already squeezed budgets, he did not see school districts
being able to support the additional contribution on top of
what they were already doing. He posed the question of how
many schools would need to be closed to get into SBS if
there was not additional funding. He added that it would be
a tough discussion for a beginning teacher living paycheck
to paycheck to take a 6.1 percent reduction in pay, albeit
for the right reasons in the long term. He explained it
would be tough for many members to swallow given the recent
ISER study indicating that statewide compensation was
already about 25 percent lower than it should be to be
competitive with other school districts. He stated that it
was part of the conversation and if they could overcome the
obstacles of the employer contribution and employee
contribution. However, the discussion had been taking place
for 20 years and the pension model was proven to not be as
effective as a DB pension. He encouraged the implementation
of a DB pension and a subsequent discussion on SBS as well.
3:53:17 PM
Representative Tomaszewski provided a scenario where a
retiree received their DB and passed away a year later. He
elaborated that the individual's wife would receive a
diminished amount of the benefit for the rest of her life
until she passed away. He asked where the principal of the
fund would go. He asked if it would remain in the trust or
be passed on to the couple's children.
Mr. Klaameyer replied that he would have to check to see
whether the money could be passed a second time after going
to the surviving spouse.
Co-Chair Schrage stated his understanding that most local
government PERS employees did not have SBS. He remarked
that perhaps it was something they could explore further.
Ms. Parady added that local contributions to public
education were in excess of $530 million in local tax
contributions. She highlighted that the recent report by
ISER indicated that over the past decade as state
contributions declined, local and federal resources
increased. She explained that districts had become
increasingly reliant on local and federal contributions as
state dollars declined. She would provide the ISER study to
the committee.
HB 78 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster thanked the testifiers. He reviewed the
schedule for the following day.
ADJOURNMENT
3:55:59 PM
The meeting was adjourned at 3:55 p.m.